Bad Investing Habits

There are some investing habits that investors need to guard against.
1) Short-term thinking:-

This happens when attention is focussed on quarterly results - both of the corporates and money managers. Once investors came to expect good short-term results, the managers had to deliver it, or risk losing a significant share of their business. In this way we created a short-term mentality - widespread, insidious, and selfperpetuating.
2) Infatuation with speculation:-

This mad rush to produce the highest return in the shortest period of time has dramatically changed the investment landscape. In fact, we now have a nasty kind of double whammy: To beat out the competition, money managers are under extra pressure to make decisions faster, but since fast decisions are not necessarily good decisions, the quarterly race is even more precarious. The focus on the short term has created a climate that favors speculation rather than investing, and individuals are as susceptible to it as the professional money managers. peculation is the activity of forecasting the psychology of the market.
3) Mental shortcuts:-

Popular metrics, however flawed, are used to simplify a complex process. Choosing which securities to buy, which to sell, and when to do either can be incredibly complex - so complex that individuals try to simplify the process by settling on shortcut methods for making stock decisions. They establish some numeric threshold for that factor,and take action only when a stock trips against it. Some of the more popular single- factor metrics are price to book value,dividend yields and price-to-earnings ratios. Other single-factor models have come into favor and gone out again over the years.It hardly matters what the metric is, for the fundamental flaw remains the same: When the universe is complex (and here I mean all the forces that affect companies and drive the market),using a single factor as the decision point severely understates reality and cripples the ability to make good decisions.

4) Race for information:-

This come about as a result of trying to predict short-term results with a view to capturing an earnings surprise. Any professional investor who could gain access to the quarterly results before they were released to the pubic could turn a nice profit buying or selling shares in advance of this surprise. The trick, then, became how to get hold of company information early. So enterprising investment professionals requested private conference calls and one-on-one meetings with company management, ahead of reporting time.

5) Overload of information:-

The Internet makes information just a click away. It thus calls for connect interpretation and analysis of data.
6) Reliance on tainted objectivity:-
Brokerage reports are made with an objective of getting trades. There are practically no sources of objective analysis.
7) Emotional potholes:-

Behavioral finance experts have argued convincingly that various psychological missteps - including overconfidence, overreaction, bias, loss aversion and mental accounting - often lead investors to make foolish mistakes that can have adverse effects on their portfolios. Today, the study of psychology is every bit as important to investing as the study of balance sheets and income statements.