10 Mistakes Every Investor Makes and How to Avoid Them HTML version
10 Mistakes Every Investor Makes & How to Avoid Them
Mistake #4 – Letting the Media Influence Decisions
The stock market is partially driven by emotion. Many investors would
say in the short-term the market is entirely driven by investor
psychology. People hear a stock tip about an upcoming earnings
report, and they race to get in before everyone else does. An
earnings report disappoints Wall Street and the stock drops 10% in
after-hours trading, which keeps investors up all night in a panic and
they immediately sell first thing in the morning.
While psychology ends up being the primary driver for decisions for
individual investors, the assets you buy should not be an emotional
decision. This is why it is imperative for investors to create a strategy
with specific rules that they can stick to.
However, the media loves to drive this emotion. There are television
stations dedicated to the up-to-the-minute movements in the market,
rumors and other current events. This coverage keeps viewers glued
to the television, which drives advertising revenue.
Notice, though, the pundits that report financial news are not always
professional investors. Furthermore, you never get straight answers.
The media will interview multiple experts about current economic
conditions and how to play the stock market, and every “expert” will
contradict the previous expert’s recommendation. As a result,
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