Every investor starts out believing he has the secret to success. That he is just as smart, if not smarter, than 99% of the other investors out there. 

It generally doesn't take long for him to discover that he's one of the 99%, not one of the 1%.

The most successful investors of all time -- Buffett, Lynch, Templeton -- knew from the very beginning that what stands between mediocrity and greatness is the ability to think with the head, not the heart, and to stand by one's convictions.

No one starts out thinking, "Gee, today I'm going to make all the mistakes in the book." But when the markets start roiling, only those with an iron constitution can prevent their emotions from taking control. Humans are hard-wired to react emotionally, especially when it comes to money. 

As the greats already know, the emotional response is almost always the wrong response. But if you train yourself to recognize when your feelings take over, you can take positive action to keep them at bay.

University of Chicago professor, Richard Thaler*, specializes in behavioral finance. He's identified a number of common biases that lead to poor investing decisions.

Look back on the worst investing decisions you've made. More than likely, you made one of the top 5 mistakes Thaler identified. Does any of this sound familiar?

1. I followed the herd. There is comfort in knowing you're part of a group. But the camaraderie you feel cheering along with fans of your favorite team are the exact opposite of what you should feel when making investment decisions. 

It is a well-known axiom that the crowd piles in at the top of the market and frantically sells at the bottom. If the crowd were always right, making money in the stock market would be simple and we'd all be billionaires. 

Following the crowd means at best you'll be equal to everyone else, whether they succeed or fail.

2. I worried too much about the price I paid. If you bought a stock two months ago at $35 and the price has fallen to $28, it does not matter from an investing standpoint what you originally paid for it. The purchase price only matters when you sell. Selling just because prices decline will only lock in losses. 

If you decide to hold your stock, you are essentially saying, "I am willing to buy this stock at $28."  

Your investment thesis doesn't change just because the share price declines. If your original assessment is still valid, then the share price is irrelevant. Only when the facts have changed should you reconsider your original analysis. 

3. I lost sight of why I bought the stock in the first place. You know the market bounces to-and-fro every day, yet you still obsessively watch the ticker tape. You've set your smart phone to send you updated prices minute-by-minute. 

Unless you're a day trader, watching the minute-by-minute ticks is a waste of time. It's just noise. (Click here to read our popular article, The Critical Difference Between Intelligence and Noise). Your investing thesis was right, so stick with it until the facts change. Then execute your exit strategy. You have one don't you?

4. I sold when I was afraid, or I bought when I felt it was safe. Baron Rothschild famously said, "The best time to buy is when there is blood in the streets." It's the famous strategy that everyone can recite, but few can follow: Buy low and sell high. 

Warren Buffett bought when the economy and the market was most bleak back in 2008 and 2009. Commentators speculated that Buffett had finally lost his touch, that there was no way his investments would ever make money. Everyone was afraid that the world economy was about to collapse. Buffett thought it was a great time to buy.

5. I became irrationally attached to a particular investment or idea. You love a company and its products. The share price has skyrocketed, surpassing your wildest expectations. You're worried that the shares are overvalued. But you just…can't…sell.

This is a variation of "anchoring bias." The company has been good to you. You love it. You're devoted to it. The problem is the shares cannot love you back. Share price is totally indifferent to your devotion. If you know your investment is overvalued, stick to your original investing thesis. Pull the trigger and sell.

Be the cold calculating investor you know you can be. Leave your emotions at the door. Your portfolio will thank you.

*Thaler is coauthor, with Cass R. Sunstein of Nudge: Improving Decisions About Health, Wealth, and Happiness (Yale University Press, 2008). Nudge discusses how public and private organizations can help people make better choices in their daily lives. "People often make poor choices - and look back at them with bafflement!"