Warren Buffett, one of the world’s most successful investors, once said that the three most dangerous words in investing are this time it’s different. It’s wise advice, but many people still ignore it and make big money mistakes as a result. In an interview with CNBC, Buffett elaborated on how people can get stuck on unrealistic investment ideas and then make poor investments or lose money altogether because they stubbornly hold onto their ideas as the market changes around them. Beware of This-According to Warren Buffett
Fear
Investing legend and Berkshire Hathaway CEO Warren Buffett has said that there’s class warfare, all right, but it’s my class, the rich class , that’s making war . . . and we’re winning. And so far he’s right: The rich have gotten richer in recent decades. Nowadays only a small fraction of Americans own stock; back in 1995 about half did.
Human Behaviour
The financial markets have never been more volatile. And that means you have to do something about it. The best defense is to have a lot of money when other people are scurrying around like rats looking for a hole in which to hide.
Self-Fulfilling Prophecies
Once a spiral gets started it can feed on itself. Today’s pessimism becomes tomorrow’s reality. That which is expected seldom disappoints.
Overconfidence
The I can quit anytime attitude is common in a bull market. People become overconfident and careless. They take more risk because they think it’s safe. They forget that paper losses don’t matter—only real ones do. When prices fall sharply, many investors panic and sell at a loss.