When we’re constantly inundated with breaking news and catchy headlines, it’s difficult to consider life beyond the daily news cycle. But a short-term mindset can destroy an investment portfolio. Paying attention to short-term market changes leads investors to imagine the worst possible outcomes and make terrible decisions.
A common behavioral mistake is to let the tax tail wag the investment/financial planning dog. People often go to extreme lengths to avoid realizing capital gains today so they won’t incur capital gains taxes that have to be paid today.
In the catalog of investment mistakes, a concentrated position holds a special place of dishonor because it is the embodiment of multiple cognitive and behavioral errors. Outperformance isn’t a rational financial goal, and concentrated positions present substantial, potentially ruinous risks.
