3 Mistakes You’re Probably Making With Your Investments
The book “How Not to Invest” highlights the big things investors get wrong.
Kathleen Coxwell
Money Talk, July 3, 2025
When it comes to investing, sometimes the best moves are the ones you don’t make.
In “How Not to Invest: The Ideas, Numbers, and Behavior That Destroy Wealth — and How to Avoid Them,” financial strategist Barry Ritholtz flips the script on traditional investment advice, focusing on avoiding common pitfalls rather than chasing flashy strategies.
His core message? Successful investing is often about discipline, patience, and steering clear of your own worst instincts. The premise of this book is that investing isn’t so much about what you do right; it is more about avoiding mistakes.
Barry Ritholtz, a Highly Respected Voice
Barry Ritholtz is one of the most respected voices in the world of finance, known for his no-nonsense approach to investing and his ability to cut through market hype. He is the co-founder and chief investment officer of Ritholtz Wealth Management, a firm that emphasizes evidence-based investing and long-term financial planning.
In addition to managing billions in client assets, Ritholtz is a prolific writer and commentator. He has published thousands of columns on investing for the Washington Post, Bloomberg, and The Street, plus more than 43,000 posts on his excellent blog, The Big Picture.
Additionally, he hosts the popular Bloomberg podcast “Masters in Business,” where he interviews top minds in finance, economics, and business.
What sets Ritholtz apart is his deep understanding of behavioral finance — how our emotions and cognitive biases influence investment decisions. “How Not to Invest” distills decades of research and experience into a simple, powerful message: the best investors are the ones who learn what not to do.
Bad Ideas, Bad Numbers, Bad Behavior, and Good Advice
Ritholtz organizes “How Not to Invest” into four clear and compelling sections: Bad Ideas, Bad Numbers, Bad Behavior, and Good Advice.
Each part tackles a different set of investing missteps that can quietly derail your financial success.
- In Bad Ideas, Ritholtz explores the seductive but flawed strategies that often lead investors astray.
- Bad Numbers dives into the misuse of data, showing how misleading stats and poor assumptions can distort decision-making.
- Bad Behavior highlights the psychological traps — like fear, greed, and overconfidence — that sabotage even the smartest investors.
- Finally, in Good Advice, he shares time-tested principles and habits that actually work.
Together, these sections offer a roadmap not just for avoiding mistakes but for becoming a more grounded, thoughtful investor.
Here are three takeaways from “How Not to Invest.”
- Bad Idea: Following the Emotional Ups and Downs of the Financial Media
One of the most dangerous habits for investors? Taking cues from the financial media. In “How Not to Invest,” Ritholtz warns that the media isn’t designed to help you build wealth. It’s designed to grab your attention. Headlines are crafted to stir emotion, amplify fear, or promise quick riches, not to offer thoughtful, long-term investment guidance.
Ritholtz argues that reacting to news cycles — whether it’s market crashes, political shifts, or hot stock picks — is a fast track to bad decisions. The media thrives on urgency, but good investing thrives on patience. When you chase breaking news or follow talking heads with bold predictions, you’re more likely to trade impulsively, time the market poorly, or fall for trends that fizzle out.
What to do instead: Ritholtz advises tuning out the noise and tuning into your own financial plan — one grounded in evidence, tailored to your goals, and resilient to the hype machine. After all, the best investment advice is rarely delivered in real-time on cable news.
This is an excellent argument for the Boldin Retirement Planner, arguably the most complete financial planning tool available online, where you are in complete control of your own financial future.
- Bad Numbers: Economic Innumeracy
Economic innumeracy refers to the widespread inability to understand, interpret, or critically evaluate economic and financial numbers. It’s not just about poor math skills; it’s about misunderstanding how numbers apply to real-world economic decisions.
- People who are economically innumerate might:
- Confuse nominal and real returns, ignoring inflation
- Misjudge the impact of compound interest (both how powerful it is and how slow it starts)
- Be swayed by cherry-picked statistics or misleading graphs
- Take precise predictions as fact, rather than estimates with uncertainty
- Misinterpret economic indicators like GDP, unemployment rates, or CPI
- React emotionally to big-sounding numbers without context (e.g., “$1 trillion in debt!” vs. “debt as a % of GDP”)
Ritholtz highlights economic innumeracy as a core problem in “How Not to Invest” because it leads people to make poor financial decisions based on bad or misunderstood data.
His advice? Learn the basics of how numbers work in an investing context and be skeptical of anyone presenting data without explanation or context.
- Bad Behavior: Giving in to Your Own Cognitive Biases
One of the most underestimated risks in investing isn’t market volatility; it’s how your brain reacts to it.
In “How Not to Invest,” Ritholtz shines a light on the subtle yet powerful role that cognitive biases play in derailing good financial decisions. These are mental shortcuts — built for survival, not investing — that often lead us astray.
Ritholtz explains that biases like confirmation bias, overconfidence, hindsight bias, and loss aversion can cloud our judgment and fuel impulsive decisions.
For example, you might cling to a losing stock because selling feels like admitting failure (loss aversion), or you might ignore warning signs because you’re only seeking opinions that support your existing belief (confirmation bias). Worse, in times of stress, these biases compound, just when clarity matters most.
The danger isn’t just that we have biases. It’s that we rarely notice them. That’s why Ritholtz argues for creating systems that protect us from ourselves: automatic contributions, diversified portfolios, and written investment rules that reduce the space for emotional decision-making.
Recognizing your biases doesn’t make you weak. It makes you a smarter investor. The more aware you are of these mental traps, the better equipped you are to avoid avoidable mistakes.
