The Little Book of Market Myths: How to Profit by Avoiding the Investing Mistakes Everyone Else Makes

Preface

Questioning yourself is hard.

One of the hardest things we do (or rather, don’t do). Folks don’t like questioning themselves. If we question, we might discover we’re wrong, causing humiliation and pain. Humans evolved over many millennia to take any number of extraordinary and often irrational steps to avoid even the risk of humiliation and pain.

Those instincts likely helped our long-distant ancestors avoid being mauled by wild beasts and starving through long winters. But these deeply imprinted instincts often are exactly wrong when it comes to more modern problems like frequently counterintuitive capital markets.

I often say investing success is two-thirds avoiding mistakes, one-third doing something right. If you can just avoid mistakes, you can lower your error rate. That alone should improve your results. If you can avoid mistakes and do something right on occasion, you likely do better than most everyone. Better than most professionals!

Maybe you think avoiding mistakes is easy. Just don’t make mistakes! Who sets out to make them, anyway? But investors don’t make mistakes because they know they’re mistakes. They make them because they think they’re making smart decisions. Decisions they’ve made plenty of times and have seen other smart people make. They think they’re the right decisions because they don’t question.

After all, what sense does it make to question something that “everyone knows”? Or something that’s common sense? Or something you learned from someone ...