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8 Deadly Sins of Investing in Stock Market

eight-deadly-sins-of-investing-in-stock-market

8 Deadly sins of Investing in Stock Market

8 Deadly sins of Investing in Stock Market



We all know the importance of investing, but it is, by no means, an easy process. It needs a lot of research and thinking on the part of an investor. Then there are these biases that lead to poor investment decisions:

eight-deadly-sins-of-investing-in-stock-market-lack-of-diversification

Lack of Diversification

Lack of Diversification



One tends to believe that a portfolio is diversified when it is, in fact, a pool of highly correlated assets.

eight-deadly-sins-of-investing-in-stock-market

Optimism

Optimism



When dealing with reality, overly optimistic assumptions tend to lead to rather dramatic reversions.

eight-deadly-sins-of-investing-in-stock-mental-accounting

Mental Accounting

Mental Accounting



To justify success and failure, one tends to separate the performance of investments.

eight-deadly-sins-of-investing-in-stock-regret

Regret

Regret



Due to regret of failure in the past, one doesn't take necessary action.

eight-deadly-sins-of-investing-in-stock-loss-aversion

Loss Aversion

Loss Aversion



Also called "panic selling", it is a fear of loss, leading to withdrawal at the worst possible time.

eight-deadly-sins-of-investing-in-stock-narrow-framing

Narrow Framing

Narrow Framing



Without considering the effect on the total portfolio, one tends to make decisions on a part of it.

eight-deadly-sins-of-investing-in-stock-anchoring

Anchoring

Anchoring



Instead of adapting to a changing market, one continues to focus on past events.

eight-deadly-sins-of-investing-in-stock-herding

Herding

Herding



What often leads to a buy high and sell low outcome is when one blindly does what everyone else is doing.

eight-deadly-sins-of-investing-in-stock-market

8 Deadly sins of Investing in Stock Market