The Finance Blogger


7 Lies Investors Tell Themselves

7 Lies Investors Tell ThemselvesWe all tell ourselves lies from time to time and sometimes we even believe our own lies. This can be a problem, especially if money is involved. We out together a list of 7 Lies Investors Tell Themselves to help us all, the writer included manage our financial affairs and avoid losses. Even Warren Buffet has his own list which we have read and included with our own interpretation.  If your going to be successful financially, it is important to really examine your decisions and your beliefs. Otherwise you may be believing your own lies and paying a high price for your decisions with reduced stock valuations and even losses in the market as it fluctuates.

7 Lies Investors Tell Themselves

Beat the Market – it is very difficult to beat the market, many experts have tried and usually failed although on the odd occasion they do. As an average investor, chances are the best you can do is either be a long term investor and not worry about the ups and downs. Or you can sell when you have made money and buy back in when the market is down. It can always go higher and it can go lower, but at least you made money!

Stock Picks Made Money – Chances are you were just lucky. No one really can predict the short term fluctuations of stocks. Long term there is more of a chance, but not short term. Pick high quality stocks with good balance sheets that pay regular increasing dividends and watch them grow over time.

Bond Prices Fall – Fed’s Caused it is a nice excuse, but really it is the competitive currency wars that are ongoing all of the time which push rates in one direction or another. As interest rates change around the world, so do currencies and so do Bond rates. Yes in the short term the Fed may have an impact, but overall it really depends on the corporate results, the competition from other countries and what they do with their currencies.

Portfolio Has Grown – has your portfolio grown because of deposits? because of dividends or both? The real return on your investments depends on the capital appreciation which sometimes can be negative, the deposits you make and what you do with the dividends and interest your investments generate. They all contribute to portfolio growth.

More Lies Investors Tell Themselves

It is only a Paper Loss – my favorite is the paper loss or even the paper profit. Nothing is final until you sell.. The real question is what do you do when an investment is down. Do you sell and trigger the loss, do you hold and hope for the best? Both are viable solutions. A paper loss really means nothing until you take action.

Bought it for Diversification – Diversification is a good thing, but each investment must be well thought out and have positive investment attributes on its own. Just don’t buy to increase diversification by itself. You could lose a bundle.

Timing the Market – Get out before the correction whenever it is. You will almost always be wrong. Get out when you have made a profit or if the investments are good quality investments with income, hang in there for the long term. Timing the markets, particularly when they are volatile is an impossible task.

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