This is a very useful list. There are a few here that bear some discussion. “Investing near the top” (#7) is another factor of emotional investing because it is a factor of confidence. The “cycle of emotion” graphic shows a graph that looks like a steep bell curve with two marks; one near the top of the curve and one, on the other side near the bottom. The one near the top, as you can guess is where the investor finally muster sufficient confidence to re-invest. However, she buys in so near the top that when the market cycles down again she has realized very little gain. The mark near the bottom is the place on the market cycle at which she has become so discouraged that she sells and locks in her losses.
I know a wealthy guy who decided to get his securities license because his family had significant wealth to manage. I never asked him if he took over his family portfolio but I cautioned him about his exposure to his emotions. Just because he had gained the knowledge about professional investment practices, he was still emotionally attached to the portfolio. He had no “arms length” from his money.
The “water cooler” mistake we usually call the “hot tip”. This one is the same mistake as buying on past performance; in this case your buddy has made his; there is no guarantee the ball will keep rolling in the same direction. “Failure to harvest winnings” #6 explores all the emotions surrounding the question about how long to hold. Readers here know that I practice rebalancing in my portfolios. Harvesting winnings is part and parcel of that practice but it should be noted that it is a mathematical determination, not speculative. Perhaps I will return with more critique on this list of 7 mistakes. For now, I wanted to endorse them and share them with my clients and friends.