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This book, from New York Times best-selling author Peter Mallouk, will help you avoid the mistakes that stand in the way of investment success!

A reliable resource for investors who want to make more informed choices, this book steers readers away from past investment errors and guides them in the right direction. The Five Mistakes Every Investor Makes and How to Avoid Them, Second Edition, focuses on what investors do wrong, so you can avoid these common errors and set yourself on the right path to success. In this comprehensive reference, you'll learn to navigate the ever-changing variables and market dilemmas that can make investing a risky and daunting endeavor. In this Second Edition, Peter Mallouk shares new investment techniques, an expanded discussion of the importance of disciplined investment management, and updated advice on avoiding common pitfalls.

In this updated Second Edition, you'll find a workable, sensible investment framework that shows you how to refrain from fighting the market, misunderstanding performance, and letting your biases and emotions get in the way of investing success.

  • Offers updated discussion and investment techniques to improve your performance in today's market conditions
  • Details the major mistakes made by professional and everyday investors, including fighting the market, overactive trading, and not having an endgame
  • Highlights the strategies and mindset necessary for navigating ever-changing variables and market dilemmas
  • Includes useful investment techniques and discusses the importance of discipline in investment management

The Five Mistakes Every Investor Makes and How to Avoid Them, Second Edition leads you in the right investing direction and provides a roadmap that you can follow for a lifetime.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Preface
  6. Acknowledgments
    1. Notes
  7. About the Author
  8. Legal Disclosure
  9. INTRODUCTION: The Market Wants to Be Your Friend
    1. Note
  10. MISTAKE #1: Market Timing
    1. The Idiots
    2. Why Is It So Hard to Beat the Market?
    3. Efficient Markets
    4. The Evidence (Research and Stuff)
    5. The Media Get It Wrong, Over and Over Again
    6. Economists Get It Wrong, Over and Over Again
    7. Investment Managers Get It Wrong, Over and Over Again
    8. Newsletters Get It Wrong, Over and Over Again
    9. Your Buddy
    10. Strategies That Don't Sound Like Market Timing but Are Market Timing—Oh, and They Don't Work Either
    11. Asset-Class Rotation
    12. Tactical Asset Allocation
    13. Style Rotation
    14. Sector Rotation
    15. What Smart Investors Have to Say on Market Timing
    16. Knowing All This, Why Would Anyone Market Time?
    17. Corrections
    18. Bear Markets: An Overview
    19. Bear Markets Happen for Different Reasons, but the Outcome Is Always the Same
    20. Bear Markets Are Not Predictable
    21. When Bear Markets “Turn,” They Make People on the Sidelines Look Silly
    22. The Market Is Volatile—Get Used to It
    23. You Can't Wait for Consumers to Feel Good
    24. Learning to Accept the Bear Markets
    25. Miscalculating the Risk of Market Timing
    26. But What If I Am Perfect?
    27. Lump-Sum Investing versus Dollar-Cost Averaging
    28. Learning to Fly
    29. Avoiding Mistake #1—Market Timing
    30. Notes
  11. MISTAKE #2: Active Trading
    1. The History of Active Trading
    2. Active Investment Managers Lose to Indexing
    3. Newsletters Lose to Indexing
    4. Active Mutual Funds Lose to Indexing
    5. Survivor Bias (a.k.a. Mutual Fund Performance Is Even Worse Than the Data Suggests)
    6. What About the Winners, Huh? What About the Winners?!
    7. Hedge Funds Lose to Indexing
    8. Endowments—Misperception of Performance
    9. Venture Capital (Sounds Sexy but Usually a Dog)
    10. The Taxman Cometh (a.k.a. Dear Goodness, It Gets Worse)
    11. Portfolio Activity Hurts Performance
    12. But Doesn't Active Management Work in a Down Market?
    13. Why Indexes Win
    14. But Indexing Results in Average Returns
    15. S&P 500, Here I Come!
    16. Avoiding Mistake #2—Active Trading
    17. Notes
  12. MISTAKE #3: Misunderstanding Performance and Financial Information
    1. Misunderstanding #1—Judging Performance in a Vacuum
    2. Misunderstanding #2—Believing the Financial Media Exists to Help You Make Smart Decisions (a.k.a. the Media Is Killing You)
    3. Misunderstanding #3—Believing That the Market Cares About Today
    4. Misunderstanding #4—Believing an All-Time High Means the Market is Due for a Pullback
    5. Misunderstanding #5—Believing Correlation Equals Causation
    6. October Is The Worst Month to Invest
    7. Sell in May and Go Away
    8. Misunderstanding #6—Believing Financial News Is Actionable
    9. Misunderstanding #7—Believing Republicans Are Better for the Market Than Democrats
    10. Misunderstanding #8—Overestimating the Impact of a Manager
    11. Misunderstanding #9—Believing Market Drops Are the Time to Get Defensive
    12. Avoiding Mistake #3—Misunderstanding Performance and Financial Information
    13. Notes
  13. MISTAKE #4: Letting Yourself Get in the Way
    1. Fear, Greed, and Herding
    2. The Overconfidence Effect
    3. Confirmation Bias
    4. Anchoring
    5. Loss Aversion
    6. Mental Accounting
    7. Recency Bias
    8. Negativity Bias
    9. The Gambler
    10. Avoiding Mistake #4—Letting Yourself Get in the Way
    11. Notes
  14. MISTAKE #5: Working with the Wrong Advisor
    1. Most Advisors Will Do Far More Harm Than Good
    2. Advisor Selection Issue #1—Custody
    3. Advisor Selection Issue #2—Conflict
    4. Test #1—Independent Advisor or Broker?
    5. Investment Advisor Defined
    6. Broker Defined
    7. So What's the Difference?
    8. So What's the Difference?
    9. Test #2—Pure Independent versus Independent and Broker
    10. Test #3—Proprietary Funds versus No Proprietary Funds
    11. A Final Thought on Conflicts
    12. Advisor Selection Issue #3—Competence
    13. Competence Check #1—Do the Advisor's Credentials Meet Your Needs?
    14. Competence Check #2—Is the Advisor Right for You?
    15. Competence Check #3—Is the Advisor Following a Process That You Agree With?
    16. A Final Thought on Advisors—Principles
    17. Avoiding Mistake #5—Choosing the Wrong Advisor
    18. Notes
  15. MISTAKE #6: No Mistaking
    1. Rule #1: Have a Clearly Defined Plan
    2. Rule #2: Avoid Asset Classes That Diminish Results
    3. Cash— The Illusion of Safety
    4. The Illusion of Gold as a Way to Grow Wealth
    5. Rule #3: Use Stocks and Bonds as the Core Building Blocks of Your Intelligently Constructed Portfolio
    6. Rule #4: Take a Global Approach
    7. Rule #5: Use Primarily Index-Based Positions
    8. Rule #6: Don't Blow Out Your Existing Holdings
    9. Rule #7: Be Sure You Can Live with Your Allocation
    10. Rule #8: Rebalance
    11. Rule #9: Revisit the Plan
    12. The Ultimate Rule: Don't Mess It Up!
    13. Portfolio Example
    14. The “I Want to Beat the Market” Portfolio
    15. The “I Need 7 Percent to Hit My Long-Term Retirement Goal” Portfolio
    16. The “Get Me What I Need for the Rest of My Life with the Least Volatility Possible” Portfolio
    17. The “I Have More Money Than I Will Ever Need and I Want It to Grow with Minimal Volatility” Portfolio
    18. The “I Have More Money Than I Will Ever Need, Volatility Doesn't Bother Me, and I Want It to Grow Along with the Market” Portfolio
    19. A Path to Success: Intelligent Portfolio Construction
    20. Notes
  16. You're the One
    1. Note
  17. CONCLUSION: Let's Roll!!
    1. Notes
  18. References
  19. Index
  20. End User License Agreement
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