7 Deadly Investing Sins

For video version go to: https://www.youtube.com/watch?v=fncEIcWHZcY
See our upgraded website at: http://www.cybloom.com

With no further adu, here they are.

1 Basing your Investments on (Lust)
A deep lust for wealth can quickly motivate you to take BIG risks, with low reward ratio. Massive leverage and unbalanced portfolios often result. Investing is about getting rich carefully!

2. Not Diversifying (Gluttony)
Do not overindulge yourself on a certain investment, whether it be a specific stock, sector or real estate location! Diversification is the closest thing to a free lunch there is, since you dramatically reduce risk without diminishing reward.

3. Getting (Greedy)
Remember, bulls and bears make money, while pigs get slaughtered. If you have made a good profit on an investment, then take some of the table. Do not get greedy, since you quickly end-up placing yourself in the epicenter of a big pullback. It is very common for stocks to gravitate towards their medium-term price average (20-50 day-moving-average) after e.g. a short-term move upwards or downwards (5-10 day-moving-average).

4 Not Giving your Portfolio a Health-check (Sloth)
Do not just invest your money and then neglect to check how it is doing. While you do not have to check on a daily basis, you certainly should give it a weekly health-check; especially if you actively invest in stocks. Slothful investors often end-up with horrid investments that pollute their portfolio. ETF and mutual fund investors can however relax a bit more.

5 Panic/Anger Selling (Wrath)
The key to investment is to SELL on GOOD days, and BUY on the BAD ones. Many people have lost fortunes by letting wrath do the trading, e.g. by selling in fury when their stock experience a pullback. You should only sell or buy with a cool and rational mindset.

6 Coveting All the Opportunities you Missed (Envy)
There will always be a score of missed opportunities, but there is no point in coveting them. The entire point of investing is to find potential opportunities, that is, before they become home runs. You want to find a good candidate, with no big liabilities, but that has not skyrocketed yet. It is just as dangerous to catch a falling knife, as trying to ride a rocket on low fuel.

7 Getting Cocky because of Some Good Trades (Pride)
Most investors WILL NOT be able to beat the market, and that goes for both retail and institutional investors. So unless you plan too actively manage money, invest passively in mutual funds, ETF’s and the likes… or simply stick to investments with long history of high performance (i.e minimum over the last 3 years).


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