Why most people fail at investing

In Investment by CreatingWealthYoung0 Comments

My first investment was in high school. My high school offered a finance elective course which allowed students to trade stocks in a simulated game. It was my first time trading stock and the simulation was meant to provide us with some real life insight on how the stock market operated without us losing our real money.

Once I reached university, I started investing with my own money after my first year. Despite the high school experience, I really had no clue what I was doing still.

But my experience in high school showed me it was possible to make money from the stock market and I invested my first $500 in a mutual fund. I set up an on-going pre-authorized contribution each month after my initial purchase.

That investment decision helped me save towards my first house, wedding and create an emergency fund. But despite the success, investing isn’t easy. In fact, in today’s conditions, it’s a jungle out there. But it did get me thinking why I was able to achieve some success with my investments while others struggle or do not achieve the same success with their investments.

There are a countless number of factors that go into having a successful investment. But I want to focus on one particular reason I believe accounts for up 50% of a person’s investment success. It’s often overlooked and instead, the focus is on the other 50% such as stock selection, diversification, timing, fee, and other similar items.

The overlooked item or more accurately person is you. Yes, you. No, not me, you. In my opinion, the average investor fails at investing because they fail to address the obstacle to their success; themselves.

You are the reason you sell your investment the minute it goes down, despite your advisor reminding you of your long-term objectives. You tend to be arrogant about your investment abilities. You believe you can become a professional portfolio manager while raising a family and working full-time without taking any educational or certification courses in investment. You believe speculating is the same thing as investing. You fail because you lack patience and always fall for the get rich quick schemes.

Look, I’ve said this before and will continue to say this again until it’s hammered into your head. Financial success is less about arithmetic and more about emotional disciple. To be successful at investing, you require emotional disciple.

Most people are good at the initial phase of investing. They go to their local bank, speak to their advisor, determine their goals and objectives, purchase a basket of stocks with good diversification. But the true test comes when the market goes down and more importantly when it goes up.

The minutes things go down or up, they forget about everything and make decisions that are mostly based on their emotions. You have to address your emotional weakness and hold yourselves accountable first, before anyone else. This is your money and you need to be as accountable for it as much as anyone else.