When searching for a better yield, too many investors seem to miss the obvious. They focus on the headline gross yield and fail to understand they are more likely to lose their capital than they are to achieve a disproportionally high return on their investment.
It is almost human nature to overlook critical details when making an investment decision. As recently featured on the BBC (Horizon: How to Avoid Mistakes in Surgery), checklists are being used to greatly reduce the chance of deadly mistakes in many professions. There are 30% fewer medical mistakes in operating rooms because of checklists. In the airline industry, checklists are standard practice and the number of fatal or near fatal incidents have dropped dramatically.
The doctor who spotted the improvements in the airline industry and then applied the same concepts to medical procedures is Dr. Atul Gawande. On the Horizon Show and in his book, The Checklist Manifesto: How to Get Things Right, the doctor explains how educated people in the heat of the moment will make mistakes that seem obvious in the cold light of day. The risk is greatest for educated, successful people who have a strong belief in their ability to make smart decisions. More so if they become emotional or the environment has become stressful.