INVESTING TIP: STAY CLEAR OF MIND TRICKS

Just like what you hear from people deluded by their psychological state, you way of thinking and responding to circumstances can also affect the way you deal with your investments. Here are some of the most common pitfalls generated from your outlook when it comes to investing and making your move within the marketplace.

Anchoring

This trap can be defined as jumping to conclusions the moment you saw view something as beneficial or tilted in you favor. For example, a person with this kind of mindset may stumble into a prosperous company and immediately become overconfident in betting at its stocks. However, no matter how successful a firm may be, it is bound to encounter declines, so it is necessary that you weigh thing first before plunging into something. The key here is to be flexible enough to be able to anticipate what may happen in the future instead of focusing only on what’s in front of you.

Sunk Costs

Meanwhile, this covers the refusal to acknowledge that you may have made a mistake in one of your decisions which is causing a disaster in your investments. It includes defending or protecting your previous actions despite the clear fact that your finances are sinking fast. Given this, it is better not to have emotional commitment, and be prepared to get off before things got worse.

Verification

While it is wise to seek advice from those who have ample experience, make sure that these people’s own holdings are not dwindling as well. This trap mainly centers on consistent search for confirmation from someone sharing the same situation as you. The idea of comforting each other, although it is nice, is only applicable in the short run.

Blindness

This one occurs when you keep on delaying that day you know your investments will fall altogether. Instead of facing the problem head on, you skip financial reports in the newspapers, lulled by the idea that if you refuse to acknowledge a conflict you know very well is there, it will not take place anymore.

Relativity

Yes, aside from your financial woes you have other aspects to cater to as well such as your family and social life. Because of this, it is inevitable that these people will have a say on how you manage your holdings. Nevertheless, keep in mind that their opinions are not always relevant to your current situations and the only choices you must make are those according to your own context.

Superiority

Since a lot of investors are highly educated, there is a danger of them assuming that they know everything and can outwit the market system. Many have fallen into this kind of thinking, since they are also vulnerable to previously mentioned snares.