Investment mistakes even smart investors make and how to avoid them / Larry Swedroe, RC Balaban.

Includes bibliographical references and index.

• PART 1: Understanding and controlling human behavior is important for investment success
o MISTAKE 1 Are you overconfident of your skills?
o MISTAKE 2 Do you project recent trends indefinitely into the future?
o MISTAKE 3 Do you believe events are more predictable after the fact than before
o MISTAKE 4 Do you extrapolate from small samples and trust your intuition?
o MISTAKE 5 Do you let your Ego dominate the decision-making process?
o MISTAKE 6 Do you allow yourself to be influenced by a herd mentality?
o MISTAKE 7 Do you confuse skill and luck?
o MISTAKE 8 Do you avoid passive investing because you sense a loss of control?
o MISTAKE 9 Do you avoid admitting your investment mistakes?
o MISTAKE 10 Do you pay attention to the “experts”?
o MISTAKE 11 Do you let the price paid affect your decision to continue to hold an asset?
o MISTAKE 12 Are you subject to the fallacy of the “hot streak”?
o MISTAKE 13 Do you confuse the familiar with the safe?
o MISTAKE 14 Do you believe you are playing with the house’s money?
o MISTAKE 15 Do you let friendships influence your choice of investment advisors?

• PART 2: Ignorance is not bliss
o MISTAKE 16 Do you fail to see the poison inside the shiny apple?
o MISTAKE 17 Do you confuse information and knowledge?
o MISTAKE 18 Do you believe your fortune is in the stars?
o MISTAKE 19 Do you rely on misleading information?
o MISTAKE 20 Do you only consider the operating expense ratio when selecting a mutual fund?
o MISTAKE 21 Do you fail to consider the costs of an investment strategy?
o MISTAKE 22 Do you confuse great companies with high return investments?
o MISTAKE 23 Do you understand how the price paid affects returns?
o MISTAKE 24 Do you believe more heads are better than one?
o MISTAKE 25 Do you believe active managers will protect you from bear markets?
o MISTAKE 26 Do you fail to compare your funds with proper benchmarks?
o MISTAKE 27 Do you focus on pretax returns
o MISTAKE 28 Do you rely on a funds descriptive name when making purchase decisions?
o MISTAKE 29 Do you believe active management is a winner’s game in inefficient markets?
o MISTAKE 30 Do you fail to understand the Tyranny of the efficiency of the market?
o MISTAKE 31 Do you believe hedge fund managers deliver superior performance?
o MISTAKE 32 Are you subject to the money illusion?
o MISTAKE 33 Do you believe demographics are destiny?
o MISTAKE 34 Do you follow a prudent process when choosing a financial advisory firm?

• PART 3: Mistakes made when planning an investment strategy
o MISTAKE 35 Do you understand the arithmetic of active management
o MISTAKE 36 Do you understand the bear markets are a necessary evil
o MISTAKE 37 Do you treat the highly likely as certain and highly unlikely as impossible
o MISTAKE 38 Do you take risks not worth taking?
o MISTAKE 39 Do you confuse before the fact strategy with after the fact outcome?
o MISTAKE 40 Do you believe stocks are risky only if your horizon is short?
o MISTAKE 41 Do you try to succeed even when success is highly unlikely?
o MISTAKE 42 Do you understand the importance of saving early in life?
o MISTAKE 43 Do you fail to evaluate the real cost of expenditure?
o MISTAKE 44 Do you believe diversification is the right strategy only if the investment horizon is long?
o MISTAKE 45 Do you believe that this time its different?
o MISTAKE 46 Do you fail to tax manage your portfolio throughout the year?
o MISTAKE 47 Do you let taxes dominate your decisions?
o MISTAKE 48 Do you confuse speculating with investing?
o MISTAKE 49 Do you try to time the market?
o MISTAKE 50 Do you rely on market Gurus?
o MISTAKE 51 Do you use leverage to try to enhance investment returns?
o MISTAKE 52 Do you understand that there is only one way to be a buy and hold investor?
o MISTAKE 53 Do you work with commission-based advisors?
o MISTAKE 54 Do you spend too much time managing your portfolio
o MISTAKE 55 Do you prepare your heirs
o MISTAKE 56 Did you begin your investment journey without a road map?
o MISTAKE 57 Do you understand the nature of risk?

• PART 4: Mistakes made when developing a portfolio
o MISTAKE 58 Do you consider investments in isolation?
o MISTAKE 59 Do you have too many eggs in one basket?
o MISTAKE 60 Do you underestimate the number of stocks needed to build a diversified portfolio?
o MISTAKE 61 Do you believe diversification is determined by the number of securities held?
o MISTAKE 62 Do you believe focused funds outperform?
o MISTAKE 63 Do you understand that in times of crisis the correlations of all risky assets rise?
o MISTAKE 64 Do you fail to consider your labour capital when constructing your portfolio?
o MISTAKE 65 Do you believe the investment world is flat?
o MISTAKE 66 Do you confuse indexing with the exclusive use of an S&P fund?
o MISTAKE 67 Do you consider your home as your exposure to real estate?
o MISTAKE 68 Do you fail to see the risk in high- yield investments?
o MISTAKE 69 Do you purchase products meant to be sold, not bought?
o MISTAKE 70 Do you chase the IPO dream?
o MISTAKE 71 Do you understand that you can be too conservative?
o MISTAKE 72 Is your withdrawal assumption rate in retirement too aggressive?
o MISTAKE 73 Do you hold assets in the wrong location?
o MISTAKE 74 Do you believe that all passively managed funds are created equal?
o MISTAKE 75 Do you trust but fail to verify?
o MISTAKE 76 Do you have a plan B?
o MISTAKE 77 Do you keep repeating the same mistakes?

A guide to avoiding investment mistakes reveals the most common errors investors make and provides a framework for rethinking investment and money management strategies