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However, a prime way to either lessen the severity of your mistakes or the number of them altogether is to understand the three main categories of investment mistakes:

📌 Belief Mistakes: These occur when your foundational beliefs or philosophies that guide your investment strategies are flawed. For instance, adopting a short-term, tactical allocation strategy based on a three-month view might lead to underwhelming performance if your underlying belief over such horizons is mistaken.

📌 Process Mistakes: Even with sound beliefs, mistakes can occur during your implementation process. Your technical flaws involve weaknesses in analyzing or using information, while your behavioral mistakes relate to the ability to maintain a plan.

📌 Outcome Mistakes: Your investment outcomes are not always directly linked to your beliefs and processes. Four types of outcome mistakes include bad luck, goal mismatch, the cost of sensible diversification and the natural failure rate inherent in any approach.

To truly identify your investment mistakes (and hopefully prevent some along the way), you must first determine what a “mistake” means to you. Define your beliefs, set reasonable expectations and review your decision-making processes often.