4 Things That Ruin the Most Investors

Studies show, again and again, that HOPE, GREED, FEAR, and IGNORANCE rob investors more than economic downturn, inflation, and world events combined. Trillions are lost from kids just starting their robinhood account to institutional investors and hedge funds. And it happens every day!

Hope

We humans are story-telling machines, capable of coming together, forming nations, and destroying entire countries based on stories. We carry this power over to investing. CEOs of shady companies know this very well. A company can be unprofitable for 20 years, but if they have a neat story then they can inject hope into the unsuspecting investor.

Ever notice how a small company almost never gives negative reports? They’re always positive! They are painting themselves in the best possible light so that investors hope they can make a lot of money on the stock.

Hope helps us hang on when things are dire, a trait that has kept humanity going, but it WRECKS investors.

Greed

Why do people get greedy? Because it’s wired into us by evolution. Our ancestors were more likely to pass on their genes if they had plenty. The thing is, greed can hijack our investing journey. It’s easy to invest poorly when we are focused on the getting when we should be focused on the risk of losing. Greed runs amok when markets approach a bubble because there hasn’t been a lot of losing. This has never been more apparent than the last 10 years when the stock market has risen an incredible amount year after year.

Because of this, investors and speculators forego stability for the chance to get rich quick with risky stocks, IPOs, or cryptocurrency.

Investors of all kinds destroy their wealth by following their greed.

Fear

On the other side of greed, after an investor gets burned (and hopefully learns their lesson), is fear. Losing a substantial amount of hard-earned money can be painful to the point of physical response. Some investors get so scared that they swear off investing completely, which is a shame because it’s the best vehicle that I know for creating lasting long-term financial freedom.

In the cycle of markets, fear leads the wavering investor to “cash out” or exit an investment at the worst time.

The Big 3

These first three horsemen are within all of us, and cannot be eradicated. They serve a very specific purpose, and to be rid of them would mean being rid of a large part of our humanity.

The way I think about this is like an operating system. Our programming, brought about by millions of years of evolution, is far behind the technological advances in investing and finance.

Knowing about these 3 inherent human qualities helps us notice them and dance with them during our investing journey.

No investor is above it, and anyone who says they just ignore these qualities is either lying to themselves, a robot, or an alien.

So if you’re human, the tendency will be to do this:

The last of the horsemen we can squash with vigor:

Ignorance

The cure for ignorance is knowledge.

One of the greatest things about the internet is the decentralization of information. This means that almost all knowledge is free and just waiting for us to learn it. This goes for investing, finance, or any other sort of endeavor we might undertake.

Example: without stepping foot into Walmart, I can learn about how they conduct business, who leadership is, their history, and projects/strategies that they are undertaking to continue their growth.

Personally, I have learned more about investing and finance in a year simply by reading, practicing, and exposing myself to knowledge in many mediums. However, the best form of knowledge is experience. If you want to learn about investing then start a business and run it for a year. It doesn’t even matter what you do for that business. You’ll learn about providing value, solving problems for the customer, and the core concepts of finance in a deep way that no reading can substitute.

If you want to learn about investing, buy one share of your favorite company and just watch it for a year. Notice your own hope, greed, and fear rise and fall with the price of the stock. Amazing, isn’t it?

These 4 horsemen of investing have taken more money from investors than any other factor. But now you are armed with knowledge which helps combat them.

Disclaimer: The information provided on this website is for general informational purposes only and should not be considered investment advice. Please read our full disclaimer for more information. You can access it by clicking HERE.

Responses

Subscribe To Our Newsletter

- Get smarter
- Invest wisely
- Never miss a thing

You have Successfully Subscribed!

Shares