Wednesday, October 03, 2012

famous last words

What are investors thinking when they make mistakes? What's going through their heads? The frame of mind that guides the biggest investment fumbles might be best summed up with a list of famous last words.

"I thought I was getting guaranteed high returns."
Everyone wants that, so no one will get it. Any legitimately "guaranteed" investment will attract so much money that returns will be pushed down to zero -- and negative after inflation. You aren't entitled to anything you're not willing to pay for.

"I want to get in now before I miss more of the upside."
One of the fastest roads to poor results. Buy businesses, not regrets.

"This was a one-in-a-million event."
Maybe it was. Or maybe you severely miscalculated the odds. Reality is almost always the latter.

"You can't afford not to own this stock."
As close as it gets to ringing a warning bell at the top of a bubble.

"I'm going to wait on the sidelines until there's more clarity."
The easiest way to ensure you'll miss the bulk of bull markets.

"It's different this time."
A cliche among famous last words, but easily the most important. Risk will never be eliminated, growth will never be limitless, and markets are never fully efficient. When it comes to big, basic principles of investing, it's never different this time. This truth explains the majority of investment blunders.

[I don't care, I'm still buying Apple.]

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