The most critical factor that determines your investment success is the ability to control your emotions. Emotions becloud your judgement and make you biased if you fail to contain them.
Pride
This prevents you from acquiring the requisite knowledge before committing your money into an investment. You may believe that you can never make mistake. Pride goes before a fall! Even successful investors have to do research before investing in any asset class because past events do not guarantee future success.
Recency bias
When you use short-term information to invest over the long haul, you are bound to fail. The fact that a stock has been rising in price in the last three months does not justify long-term investment in the stock. You have to dig deep to determine whether the price is as a result of market sentiments or improved performance of the underlying company.
Wanting to belong
Every human being wants to belong. But jumping on the bandwagon by buying popular stocks without doing your home-work first is a sure-fire way to investment fiasco.
Analysis paralysis
Fear of losing money or fear of being wrong may prevent you from taking advantage of opportunities in time. You keep analysing time and again. In other words, you over-analyse. Once your investment criteria are met, grab the stocks.
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