6. Your Brain Likes To Go With The Trends

Your risk tolerance should be determined as per your personal finance, your investment time horizon and the investment size. Frame dependence is a notion of behavioral finance which refers to the affinity to alter risk tolerance based on the track of the market.  For example, your eagerness to stand risk may fall when markets are falling. Otherwise, your risk tolerance may rise when markets are rising. Often this causes the investor to buy high and sell low.

7. Your Brain Is Great At Coming Up With Excuses

Don’t tend to produce excuses when your investments have gone sour. Defense mechanism leads to overconfidence if you always try to find out ways to escape the fact that there were some factors in your investments which you should have noticed earlier to avoid the loss. Whenever you face a loss, don’t listen to your brain and don’t console yourself, rather acknowledge it as your experience and analyze why it happened so.

Also Read: 10 Investments That Made Paul Ryan a Millionaire