The 5 Mistakes Every Investor Makes

This Book Will Help You Get Investing Right.

This is the message at the core of Peter Mallouk's new book The 5 Mistakes Every Investor Makes and How to Avoid Them.

Market timing and active trading

The author also makes the point that most investors try their best to time the market, despite investing heavyweights like Warren Buffet and Benjamin Graham saying that market timing is among the biggest mistakes that investors can make.

Peter claims that those investors who claim they can time the market are either lying or that they're simply plain wrong. Basically, the best time to invest is today. The author advises against active stock picking and rather recommends investing exclusively in index funds.

News

The author recommends that traders suppress the instinct to act based upon advice provided by news channels who are operating with a different agenda than investors. Providing the most relevant information isn't their most pressing task, drawing viewers is.

The book advises investors that taking the advice of fund managers whose performances have been advertised isn't the best option and that further research is always recommended to ensure that performance claims are being provided in the correct context.

Emotional factor

Emotional factors play a huge part in investing, and fear, greed, and regret will impact every investor at some point during their career and can be responsible for causing the investor to buy or sell at the wrong time. While behavioural biases such as overconfidence have been known to influence the actions of investors, this book provides solutions such as well-disciplined approaches.

Financial advisors

The stories of financial advisors misselling high-commission products to unsuspecting investors are sadly all too common, and the advice that the author gives to investors to check custody of money, conflict of interest and competence before working with any financial advisor is invaluable.

Wrong custody of money can lead to situations like we saw where investors ended up caught in Ponzi schemes like that orchestrated by Bernie Madoff. When advisors start receiving commissions for sales and recommend financial products based on this fact, they cross the line from unbiased, neutral advisors acting in their client's best interests to salespeople."