Top 10 Things Stopping You From Achieving Financial Success In Investing

Being a good investor requires a good level of knowing yourself. We are all guilty of our own biases preventing our success.

The problem is that we are often unaware of them. The result is that these hinder our path forward in life at every step of the way. This applies both to our personal and our professional life.

In this case, you will learn about the top 10 cognitive distortions that prevent people from achieving wealth in investing. For each of them, there will be an example of how it pertains to Crypto investments.

1) All Or Nothing Thinking

You look at things in absolute, black and white categories.

Example: You bought Bitcoin at 60k, it drops to 30k. You behave as if you lost it all.

2) Overgeneralization

You view a negative event as a never-ending pattern of defeat.

Example: Bitcoin dropped from 60k to 30k. You assume that it will keep dropping to 27k, then 24k, then 20k…

3) Mental Filter

You dwell on the negatives and ignore the positives.

Example: You bought Bitcoin at 20k, you watched it go all the way to 60k and drop back to 30k. You dwell on the drop from 60k to 30k, and ignore the increase from 20k to 30k.

4) Jumping To Conclusions

A) Mind reading – you assume people are reacting negatively to you when there’s no evidence for this.
B) Fortune telling – you arbitrarily predict things will turn out badly.

Mind reading doesn’t really apply to crypto so much, but here’s an example of fortune telling.

Example: ”My previous investment was a bust, so now my next one will surely also be a bust.”
 
You’re not basing your prediction on empirical evidence.

5) Discounting the Positives

You insist that your accomplishments or positive qualities “don’t count or count less“.

Example: “I doubled my investment this year, but a month ago it was triple, and now it dropped so it’s just double at this point.”
 
You’re focusing on the bad parts while ignoring the good.
 
6) Magnification or Minimization

 You blow things way out of proportion or you shrink their importance inappropriately.
 
Example: “UST stable coin lost its peg and collapsed, so that must mean that all stable coins will lose their peg. Stable coins are not safe anymore”.

7) You Reason From How You Feel

“I feel like an idiot, so I really must be one“, or “I don’t feel like doing this, so I’ll put it off“ There’s no need to give examples here, most people easily recognize themselves in this one immediately, to a larger or lesser degree.

 8) “Should Statements“

You criticize yourself or others with “Shoulds“, “Shouldn’ts“ “Musts“ “Have Tos“ and similar offenders.

Example: “I should have known that the bear market was starting”.

It’s better to use a more objective, rational language, like “It would be better if I had known that the bear market was starting”.

9) Labeling

You identify with your shortcomings. Instead of saying “I made a mistake“, you tell yourself “I’m a jerk“ or “I’m a fool“, “I’m a loser“.

Example: “I invested in Terra and I lost it all. I’m an idiot”.

10) Personalization and Blame

You blame yourself for something you weren’t entirely responsible for, or you blame other people and overlook ways that your own attitudes and behaviors might have contributed to the problem.

Example: “I invested in Btc at 60k and now it’s 30k. I hate all whale investors who are manipulating the market”.

Remember that you are most likely not the exception, we are all guilty of these cognitive distortions. Of course, it’s likely that there are a few that are “yours“, meaning that a few apply to you in particular.

In my specific case as an example, I’m most inclined towards cognitive distortions 2(Overgeneralization), 3(Mental Filter) and 5(Discounting the Positives).

A good way to realize yours is to write down negative thoughts that occur during the day/week/month, and then slot them in one of the 10 categories. That way, you will see what kind of cognitive distortions you are having, and can begin to work on it.