Things to Avoid at All Costs

Keep your distance.

Jul 25, 2014 at 11:06AM

Bad

Drop everything and run when you come across ...

Feelings of certainty. They invariably come just before big surprises.

People who claim certainty. It's the most potent way to trick someone.

Risk-free returns. You'll end up with return-free risk.

People who have predicted 564 of the last two market crashes. And there are a lot of them.

Adjusting your risk-tolerance when stocks are either crashing or surging. It's the easiest way to make a financial decision you'll regret.

Putting 30 years worth of savings into something you spent seven minutes researching. You have no right to complain about losing money in an investment you put no effort into understanding.

Extrapolating the recent past into the future. Things always change. If your forecast doesn't, you're doing it wrong.

People who aren't willing to change their minds. Including yourself. Especially yourself.

Feeling smarter after the market goes up. You had nothing to do with it.

Explanations of what were likely random events. This means almost every market move that takes place in time periods less than one year.

Having political feelings within ten miles of your investment decisions. This is a common way smart people make dumb decisions with money.

Spending more time arguing why other investors are wrong than trying to figure out what you're doing wrong.

Spending the majority of your time in a job you hate in order to make enough money to spend part of your time in a life you don't hate.

Precision. Finance just doesn't work that way.

Impatience. It's the fastest way to disappointment. 

Investments you can't explain to a third grader. If you can't, you probably have no idea what you're getting into.

Assuming your past investing behavior isn't indicative of your future behavior. It's the best guide you have.

Assuming that the random life experiences you've had provide a complete view of the world. Everyone has their own version of history and it's a tiny reflection of reality.

Reliance on pensions, inheritances, Social Security, or the decisions of anyone other than yourself to make it through retirement. Few third parties care about your wellbeing decades from now.

Six-figure student loans before you're old enough to drink. This is starting out life with your hands tied behind your back.

Assuming investors who wear suits are smarter than you. Being a smart investor has little to do with education or job title and everything to do with behavioral traits.

Assuming intelligence in one field translates to being a smart investor. I doubt there's any correlation.

Assuming that bad investments you made were the result of bad luck and good investments you made were all skill.

Measuring investment fees in basis points instead of dollars. An advisor saying, "My fee is 100 basis points" sounds so much better than, "This will cost you $35,000 per year."

Feeling entitled to investment returns, a decent job, or predictability. 

Trading on margin. Most people can't handle market volatility without leverage.

Trading, in general. You're fighting randomness and computers that can solve a trillion problems before you can blink.

Worrying about things you can't control. Like what the Fed will do next, what the market will do next month, or whether earnings will beat expectations.

Avoid those, and most everything else should fall into place.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 

Risk-free for 30 days: The Motley Fool's flagship service
Tom and David Gardner founded The Motley Fool over 20 years ago with the goal of helping the world invest...better. Their flagship service, Stock Advisor, has helped thousands of investors take control of their financial lives and beat the market. Click here to sign up today.

Contact Morgan Housel at mhousel@fool.com. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers