Video: Market coach Doug Hirschhorn, PhD, discusses the six reasons why many Americans aren't always the brightest bulbs when it comes to trading equities.
Generally, I'm just as patriotic as the next guy. I mean, I even got married on July 4th. But when it comes right down to it, there are six reasons why Americans can be, well, dumb when it comes to investing:
1. We tend to believe the so-called experts too much If 2008 taught us any lesson, it was to be skeptical and ask lots of questions.
2. Crystal balling You try to predict what is going to happen rather than pay attention to:
- What just happened
- What mistakes you made
- What lessons can be learned
- And how you can improve
3. Reactive approach instead of proactive Rule #1 in trading is to always know where your downside risk lies. You tend to only pay attention to risk when it blows up in your face.
4. Control freak You waste time each day watching your investments and the markets because you fear that if you don’t watch it, it will betray you.
5. Immediate gratification mindset You want it now, you want it fast, and you want more of it.
6. Overconfidence You think if you take your investments into your own hands then you can outperform the markets.
Even professional traders have a difficult time doing this consistently. Remember, trading is, by far, the hardest way to make easy money.
Think better, invest smarter.