When I do a risk profiling questionnaire with clients with DataPoints, the first topic in the results that we talk about is Investing Confidence. Making decisions about investing requires you to have confidence in the decisions you make. You need to be confident that you invested in the correct assets and it will come good in the long term. This can be especially true in those first few months or years when market volatility sees the value of your money fall below what you put in.
Most financially successful investors tend to have confidence in their decisions and tend to take action (or not take action) that fit in with what they are trying to achieve. They don’t get swayed by the latest hot stocks or deviate from the plan by something they read in the paper or read on Reddit.
Having too much confidence can be a danger too. You believe that you know best. You can reach your targets ahead of time by being a better trader. You try to time the market, believing you can get in at the right time and out again to maximise the returns (you also need to get back in again!). The overly confident investors believes they can trade with the best of them.
And do you know who tends to be that over confident trader? Men! They trade more and try to time the market more. And as a result, they make more mistakes. Women tend to stick to the plan that was made at the beginning and don’t deviate from it. As a result, they get better returns from the investment.
Steven Barrett
15 August 2022