The Twelve Rules of Investing, Rule #12: Take responsibility for your choices

Posted on Posted in Financial Blog

Humans have free will and all our actions are choices (though not necessarily conscious ones). Sometimes, however, we blame others for our own mistakes: this is called shunning regret. It’s the flip side of overconfidence, and appears when we’re losing money and don’t want to accept that we’re at fault.

One place where this shows up is when a self-directed investor buys stock in a high-flying company (such as Enron or WorldCom) that goes bankrupt because of management fraud. It’s easy to blame the executives for the loss, but they didn’t force the investor to buy their stock. The investor made the decision, perhaps after little or no research. (With WorldCom, even a quick look at the financial statements would have raised big red flags.) Yes, many of these executives were crooks, but the investor’s loss was a result of his own actions.

Another situation to watch for is when you delegate investment decisions to a broker or investment manager. If this person screws up, it’s sensible to blame him or her. But, did you do enough due diligence before hiring this person? And did you look at your account statements and reports regularly? The best financial professionals welcome good questions; if yours doesn’t, it may be time to look elsewhere.

Remember that even the best investors make mistakes (I know that I have), but rather than blame someone else, they accept their mistakes, learn from them, and move on. You should do the same.