Gullible + Overconfidence + Ignorance

1) Unlike Buffett, investors too often believe what they hear or read. Unsubstantiated claims of "guarantees" that are too good to be true lure investors to plunk down their hard earned coin for promises of superior results even when framed as lower risk or guarantees. But let's face it, everyone wants to be in on something really awesome and own the bragging rights to their own superiority.

Investors, avidly glued to the financial press, will follow the words of a reporter or market "guru", in order to avoid "missing" an opportunity. This was well documented during the run up of gold prices, where investors bought up the price, regardless of the fact that it was completely irrational. It happened during the tech boom-in fact, it happens all the time.

2) Investors fail because they believe in their ability to time the market or pick the right stocks. Research shows that we are hard wired to our beliefs. When we stop to analyze our beliefs against reality, we are up against a massive wall requiring a significant mental effort to breach. The panel on $Berkshire Hathaway(BRK.A)$AGM mentioned "What Investors Really Want, shows that investors seem to be inoculated with a strong dose of unrealistic optimism and overconfidence. Is it any wonder we make bad decisions?"

3) Investors fail because we don't possess the required knowledge and experience to make consistently good decisions. Rather than research and interview a variety of financial advisors in order to gain an objective view of their goals, resources, risk tolerance and time horizon, investors might likelier respond to a cold calling broker who will offer them a short cut to financial rewards. As Warren Buffett mentioned many times "Never invest in a company with a business you don't understand."