Here’s what could stop me becoming an ISA millionaire

I’ve always been interested in learning how my thoughts and behaviours have the potential to impact my investment returns and potential to become an ISA millionaire. As such, comments made by Kim Cramer Larson, Technical Analyst at Saxo Markets, during a recent webinar struck a chord.

Don’t get too comfortable

One thing that Kim points out early on is that human beings tend to be overconfident. We often believe we can control the uncontrollable. That’s certainly something I thought in my early days. Every stock I liked was sure to be appreciated by others in the market. Timing the market consistently seemed straightforward.

Fortunately, my Foolish training over the many years since has served me well. I’m now humble enough to know that not every investment I make in my Stocks and Shares ISA will turn out well. Instead of blaming my poor calls on bad luck or an absurd market, I evaluate what I could have done differently. It’s not a pleasant experience but it’s one that should lead to better returns over the long term.

And when it comes to timing, ‘little and often’ is infinitely better than second-guessing the market’s next move.

No ‘get-rich-quick’ here

Another bias pointed out by Kim is that we tend to underestimate how long it takes to achieve something. In academic circles, this is known as the ‘planning fallacy’. To get the idea across, Kim uses the example of the Sydney Opera House taking “10 years longer to build and 15 times as costly as expected“.

Unfortunately, the same thinking error can apply to investing. It’s not impossible to become an ISA millionaire in only a few years. However, it’s statistically very unlikely unless I’m willing to take excessive risks. That sounds like speculation, not investment.

Finding the right strategy takes time and effort, as does growing my wealth.

Don’t fall in love

Getting attached to stocks is remarkably easy, especially if we use that company’s products every day and only listen to sources that confirm our view on it. As Kim states: “You read the newspaper that has the same political views as you have, you listen to the analyst or the nearest information that you believe has the same opinions as you“.

To avoid missing red flags, I need to think about what could go wrong as much as what could go right. It’s also essential to not become fixated on one particular country or sector.

Look beyond the share price

A final bias covered is the idea of ‘anchoring’. This is when we give too much weight to the initial bit of information about a stock, even if it’s insufficient for making a decision about whether it’s a worthy investment. For many of us (including me in the early days), this is usually the recent performance of a company’s share price.

Naturally, there’s a limit to how much information we can take in before making any decision. However, “using one or two soundbites from one source” is not sufficient. If I want to make informed choices, I should really be reading the latest annual report or full-year results as a bare minimum. Checking the balance sheet is also vital.

Again, none of this guarantees I’ll emerge an ISA millionaire. But it might just increase my chances!