Investing Mistakes Smart People Make

Unfortunately, high IQ doesn't always guarantee successful investing. Regardless of their educational qualifications or level of 'smarts', there are some common investing mistakes that high intelligence people tend to repeat with alarming regularity. Here are a few of them.

Investing at the end stages of a bull market
Many an intelligent person has been swayed by the lure of returns, after markets have already risen significantly. Perhaps buoyed by their natural confidence in their abilities to take decisions, coupled with the short-term memory for past failures that often characterize intelligent and otherwise successful people, intelligent individuals tend to get caught up with greed all too often, and end up making losses as a result.

Trusting their Advisors too much
Many intelligent people assume investing to be a 'secondary importance' activity as they tend to be busy with their lives, and thereby delegate it wholly to their 'trusted' advisors without really paying attention to detail. As a result, they often get 'milked' for high revenue products that only serve to help these so-called Advisors achieve their sales targets! Over the long run, this habit could potentially lead to severe wealth erosion.

Buying into 'exotic' products
Exotic products (such as structured products, derivative bases PMS's and distressed asset funds) seem to hold a special place in the hearts of intelligent investors. Their innate intelligence quite likely serves to lead them to believe that they 'understand' these products better than the average investing populace.  However, these products sometimes have unforeseen risks built into them - often, ones that even their issuers don't quite understand fully. Many an intelligent investor has regretted getting locked into exotic products that have failed to deliver returns in the long run, while their less bright counterparts have made better returns in simpler products.

Piling on the policies
Even intelligent investors are usually unable to fully comprehend the actual 'returns' afforded by traditional insurance policies, as they are typically thrashed out in highly opaque ways. However, they often choose life insurance as a 'quick fix' solution to their tax saving or goal planning requirements, without realizing that the true purpose of life insurance is to protect their dependents from an unforeseen eventuality that could lead to accidental poverty. Many an intelligent investor has ended up piling on ten to twenty Life Insurance policies over time, before realizing their mistake.

Being averse to paying fees
Many an intelligent person is averse to paying their advisors fees for providing them quality, conflict free advice - without realizing that it may be the fee based advisors who are actually recommending low front load, low cost products that will help them create wealth in the long run. Their own intelligence may lead them to believe that 'paying for advice' is wasteful, and planning their investments is something they can well do by themselves. However, this is tantamount to being 'penny wise, pound foolish'.

Failing to save systematically
Intelligent people seem particularly prone to waiting for the 'big ticket' investment rather than putting away small sums of money in a systematic manner towards their future goals. Their faith in their abilities to create wealth from a 'black swan' occurrence might be a contributor to this trend. Resultantly, intelligent people all too often often miss out on the benefits of compounding that could have multiplied their savings over the long run.