7 Mistakes Every Investor Makes (and How to Avoid Them)

Forecasting is a largely futile endeavor.

A wag once quipped, “Economists put decimal points into their forecasts to show they have a sense of humor.” Accurately predicting movements in the stock market is impossible, but that doesn’t stop investment strategists from trying. In one classic example of overly precise forecasting, an auto analyst predicted that vehicle manufacturer Geely  would sell 1,618,939 vehicles in 2019, 1,753,059 units in 2020 and 1,858,030 cars in 2021. In general, the more specific a forecast, the less reliable it is.

Savvy investors understand that the future is unknown; unrealistically specific forecasts won’t change that reality. Legendary investors like Warren Buffett and Peter Lynch delve deeply into companies’ numbers, using exhaustive analysis to probe for weaknesses and search out value. For all their hard work, however, these greats avoid the temptation to boil their findings down to a single price target or exact expected rate of return. 

Investors should simply ignore experts’ projections about where the S&P 500 or other index will stand in a year. Investors must also understand the...