Confidence is a great thing. But having too much of it can prove disastrous in investing.
Over the years, I’ve seen successful people make poor investment decisions because of overconfidence.
They thought success in their careers would automatically translate into success in investing. What they didn’t know is that investing success has more to do with habits and behaviours than intelligence and analytical ability.
It’s been said that the more successful people are, the more prone they are to scams and over-confidence.
Overconfidence can give you the illusion of knowledge and control.
It can lead you to make big bets on risky investments, try to time the market, and believe that your financial acumen and returns are stronger than they are.
And the irony is that you fail to achieve your highest financial potential not because of your lack of knowledge but because of your intelligence.
To overcome this behaviour bias, you first need to become aware of it.
Then you want to bring structure and discipline into your investment approach.
And the best way to do that is to create an investment plan considering your investment goals, timeframe, and risk tolerance.