This nice collection of 15 favourite investor fallacies comes to us via Incademy (a subsidiary of

"Beginners in investment are often subjected to proverbial wisdom on the subject by friends and do-it-yourself manuals. Much of it is very bad for them, because it is false or only partially true. If you are able to spot the flaws in many of these arguments before they influence your approach to investment, you may avoid serious losses."

1. Investing is just gambling anyway, so why not take a few chances?

2. You’ve got to speculate to accumulate

3. Growth always wins in the end/Value always wins in the end

4. Blue chips are best/Smaller companies are best

5. Penny shares are the best value for money

6. It’s such a great company, I can’t go wrong

7. But just look at the dividends

8. I’ve got to be in technology/biotechnology/telecoms etc

9. I missed that one, I’ll catch the next one

10. Paper losses aren’t real

11. I’ll never go broke taking a profit

12. It can’t possibly go any lower

13. It can’t possibly go any higher

14. I can’t sell because of the tax bill

15. This time it’s different


Good stuff!


Fifteen favourite fallacies   

Category: Apprenticed Investor, Investing, Trading

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7 Responses to “15 favourite investor fallacies”

  1. Kris Tuttle says:

    My favorite is “I can make money by trading quarterly results.”

  2. FliteTime says:

    But Barry! This time it really IS different! HA!

    You ever catch Penn & Teller’s “B.S.” on Showtime? They did a call on “gurus” and self-help professionals. Their conclusion agrees with the conclusion above: so-called gurus and seminar teachers are successful when they energetically offer catchy (but empty) phrases, mantras, and other ways to summarize the Big Picture. People desparate for answers & explanations grab onto anything that sounds good. They get motivated, but still have no direction.

    Can you say, “Gentlemen, spin your wheels!”?

  3. john says:

    Can you make money trading quarterly results? I have two rules that I constituted after drinking the kool aide for many years – 1. Nobody knows nothing. 2. When in doubt trust your instincts – if you suspect it is bad it is.

    I oten thought I could become a guru teaching those two rules. They’re catchy, easily understood and quickly learned. Dr. Phil started with less and lost ground from there.

  4. VL says:

    If I may add one more: Be skeptical about some of the analyst’s recommendations and always do your own research before investing!

    Unfortunately many do not realize that for most firms the stock market is a zero sum game. What this means is that for them to profit someone else would have to lose, and often this someone is the public. The market exchanges act like distribution centers of wealth. (To get some idea of the extend of this distribution just look at the last two quarters of any large brokerage’s earnings)
    Essentially, without knowing, the public actually is betting against the same firms those analysts appear in the media attempting to brain wash the public about “the economy is strong” and “the stock market is very cheap” and that the public should rush buying according to them very cheap stocks now. (Some of these analysts appear on TV to be under pressure, desperate and almost crying for their jobs, and begging the public to buy “their favorite” and according to them “cheap stocks”).

  5. FliteTime,

    >>> People desparate for answers & explanations grab onto anything that sounds good. They get motivated, but still have no direction.

    I totally agree. It’s like one of my favorite expressions from Jim Rohm: “If you motive an idiot and do nothing else all you have is a motivated idiot.” (Loosely paraphrased from memory)

  6. david foster says:

    Good list. Another very common fallacy is this: many people implicitly assume that if a company grows sales and/or profits at X percent over Y years, then the stock price will increase in the same proportion. This fallacy (which of course is basically an assumption that valuation doesn’t matter) seems extraordinarly hard for many otherwise-intelligent people to shake, even after it’s been pointed out to them.

  7. kckid816 says:

    I wish more people would read about the penny stock bulletpoint. I work at one of the major discount brokerages, and let me tell you about my disdain for penny stocks. Not only do the market makers screw people over, but the people that seem to buy them have nothing but penny stocks. I have seen portfolios with a $100k of nothing but penny stocks. So, I guess my point is I love how people think they are smarter than the street when they do absolutely no critical analysis about what they buy