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After a brief hiatus from the The Four Pillars of Investing by William Bernstein, guided by Get Rich Slowly, we’re getting back into it. Today we’ll look at the psychology of investing.

Pillar Three: Investing Psychology

Bernstein points out the following about investing:

“You are your own worst enemy,” Bernstein writes. The number one impact on your investments is you. He explains that diversification and indexing are the most reliable methods to obtain long-term investment success.

“If indexing works so well,” he writes, “why do so few investors take advantage of it? Because it’s boring.” Many people believe investing should be exciting. But that’s not the case.

I like this point.

I also like how the book points out that you should avoid “herd behavior” and instead focus on long term investing strategies that will benefit you overall.

Another psychological investing issue is the idea that it is too hard to get started. Many would-be investors get scared off because they aren’t sure how to begin. Others think that they need a lot of money to get started. However, the important thing is to start investing. Now.

Some good places to get started in investing include these less risky investments:

• Cash (high yield savings, CDs, money market, etc.)
• Index funds
• Balance mutual funds
• Retirement accounts

Getting a handle on the way you think about investing can help you make more solid decisions. You can understand the challenges that you have, and work on overcoming them to create a better investment strategy.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions.

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