J. Lukas Neely from the Endless Rise Investor has a nice piece up that highlights the mistakes of 13 different investors and how they went about fixing them. Neely put together a really great line-up of people for this including William Bernstein, David Merkel and Tobias Carlisle to name a few.
I was asked to take part as well. Here’s my response:
Biggest Mistake: The biggest mistake I made as an investor was believing early on in my career that the best way to achieve success in the markets was to outsmart the market or other investors. I was just out of business school and got the CFA designation. I was under the impression I could do no wrong. The market is a very humbling place, so eventually I learned that it’s really not about outsmarting other investors or the market as a whole, it’s about not outsmarting yourself.
How He Could Have Fixed It: Once I learned how to control myself, my reactions and my behavioral biases and started to focus only on those areas that are within my control it really made things much simpler for me as an investor.
No one makes it through life or the markets unscathed. I see no problem with admitting your mistakes. In both the crash and subsequent recovery there have been ample opportunities to make mistakes in the markets. I’ve witnessed many investors in this time that have hurt their performance by failing to admit to and learn from their mistakes. Feeding your ego can be an expensive habit in the markets if you’re not careful.
As Charlie Munger once said, “There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.”
Learning from the mistakes of others is also a great life hack to avoid those same mistakes yourself. Keep reading for more:
A Wealth of Common Sense is a blog that focuses on wealth management, investments, financial markets and investor psychology. I manage portfolios for institutions and individuals at Ritholtz Wealth Management LLC. More about me here. For disclosure information please see here.
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