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As Ive written before, academic studies have shown that ordinary individual investors in other words, people like you and me can make some pretty ghastly investment decisions.

American researchers Brad Barber and Terry Odean, for instance, famously analysed the trading records of 10,000 brokerage accounts of individual investors over a sevenyear period, and came to a sobering conclusion.

On average, they found, investors failed to beat the market. And those investors who traded the most, it transpired, did even worse, earning an annual return of 11.4%, during a period in which the market returned 17.9%.

Do nothing

Nobel prizewinner Daniel Kahneman, who with his colleague Amos Tversky laid the bedrock on which a lot of behavioural economics is based, compellingly summed-up their research in his 2011 best-seller Thinking, Fast and Slow.

On average, the shares that individual traders sold did better than those they bought, by a very substantial margin: 3.2 percentage points per year, above and beyond the significant costs of executing the trades It is clear that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to their minds.

Its a powerful quote. Ive used it before, and I make no apology for doing so.

And damning it is. That doing nothing could be a more profitable strategy than active intervention almost beggars belief.

But its true.

Selling is only half the problem

Most cutting of all, of course, is Kahnemans reporting of Barber and Odeans finding that on average, the shares that individual traders sold did better than those they bought.

We might laugh or be appalled at such apparent stupidity, but as most of us are well aware, its all too easy to see such behaviour mirrored in our own portfolios.

For as I often remind investors, selling is two investment decisions, not one.

First, you sell. But then youve got to buy something. And most of the time, youll be selling a share that youve held and know something about, for a share that you dont hold, and know rather less about.

Confirmation bias

Spend any time reading about behavioural economics or behavioural investing, and youll soon come across the term confirmation bias.

In my view, its probably the biggest behavioural danger facing us as individual investors.

And its something of which Im very aware when making my own investment decisions, particularly when Im tempted to go over-weight on a share, or venture into areas with which Im unfamiliar.

Even so, I get caught out.

Opinions have costs

Confirmation bias, as youre probably aware, is the tendency for investors to either seek out or attach a higher weighting to information or views that support our opinions or beliefs.

And its at its most dangerous when we do both seek out such information or views, and attach a higher weighting to them.

You see it all the time in investment forums. People attack others when they advance views that differ from their own, and then endorse other voices when they advance opinions that do agree with their own.

But confirmation bias is not restricted to investment forums. Look carefully, and you can see the same thing going on in pubs, or on the golf course, or even when on ones own, reading the newspaper or browsing the Internet.

Sell! Sell! Sell!

For investors, theres an aspect of confirmation bias which is particularly insidious.

And its this. When one reads about confirmation bias, its often in the context of investors persuading themselves to buy something. In fact, its my belief that a bigger danger lies in investors persuading themselves to sell something.

Again, you see it all the time in investment forums. A bit of bad news, or a disappointing set of results, or some political or economic uncertainty and suddenly, investors are falling over themselves to announce their intention to sell, with each additional voice helping to influence others to do the same.

One can understand why, of course. Theres another aspect of behavioural investment at work: loss aversion. But that presupposes that a potential loss is likely. And in many cases, that just isnt so. And yet the more that investors see other investors jump on the sell bandwagon, the more determined they become.

Er, thats not contrarian..?

The irony, of course, is that many of those same investors would doubtless describe themselves as contrarian investors, and trot out Warren Buffetts line about being greedy when others are fearful.

In which case, of course, seeing that others are selling, they should be considering buying.

Particularly when one bears in mind Barber and Odeans finding that the shares that investors sold outperformed the ones that they bought. Buying what others are selling, in others words, can be a profitable business.

But there you go: confirmation bias is an expensive weakness to have.

For years weve been waiting for Brexit uncertainty to end so that companies can plan their futures with a bit more clarity, and investors can have more confidence in the outlook for the FTSE 100.

The financial markets did get a bit of a boost from the Conservative election victory, but then Boris just had to come up with his plan to make it unlawful for exit deal negotiations to extend beyond the end of 2020. And the renewed confidence drained again, as the chances of a no-deal departure resurfaced. Sigh.

But Im still optimistic for the coming year, and here are three reasons why I think the Footsie could end the year above 8,500 points.

Brexit

Yes, it is the big one, and though I cant see any good reason behind the PMs latest twist, I cant bring myself to believe that he would be so stupid as to crash us out of the EU with no trade deal. The government has such a big majority that it it no longer needs to pander to the right wing of the party who often appear to have a no contact with foreigners mentality, and the focus can move to whats best for British companies, their employees, and their investors.

Im still optimistic.

Dividends

FTSE 100 dividends over the past few years have been growing, and at the last check, AJ Bell found a forecast yield for the full year of 4.8%. Im certainly not complaining, but historically that really is pretty high.

Even going back only as far as 2017, the Footsie was yielding approximately 4.2%, and back over the longer term its tended to yield between 3.5% and 4%.

Its really all down to a divergence between company earnings (and the resulting dividends they can pay from them) and share prices. And even while a number of companies have been feeling the Brexit pinch, its largely been the retail sector thats been struggling as folks have been reining in their spending.

The rest of the companies in the index have actually been doing fine, but all the uncertainty has kept people scared of shares. Financial stocks perhaps show it best share prices have been performing dreadfully, even though our banks, insurers and more have been recording decent earnings.

It all suggests to me that share prices should be higher, more in line with current earnings levels, dropping dividend yields closer to their long-term expectations.

Gold?

Money that would otherwise have been invested in the stock market has to go somewhere, and over the past four years, the gold price has been on a bull run.

An ounce of the shiny stuff has risen from a low point of approximately $1,050 at the end of 2015, to around $1,510 today. Thats a four-year gain of 44%, and that suggests a lot of money that would have been heading into global stock markets has been finding itself heading for the safety of gold instead. It could return, however.

In reality, 2020 is too short a horizon for any prediction, so my 8,500 suggestion is just a bit of fun. But I really do think we could be entering a great decade for shares.

In the past, buying property and renting it out (buy-to-let) was an easy way to make money. With UK house prices continually rising, many people made a killing.

Yet looking ahead, Im not convinced that buy-to-let property is the best asset class to invest in. Heres a look at why I wont be touching buy-to-let in 2020 and where Ill be investing instead.

House price uncertainty

One thing that concerns me about buy-to-let is that house price growth has slowed considerably in recent years.

According to the UK House Price Index, between the start of January 2000 and the end of December 2016, the average property in the UK increased in value from 85,000 to 216,000. That equates to annualised growth of around 6%. However, since January 2017, the average property price has only increased to 234,000, which equates to annualised growth of less than 3% over that period.

I suspect that this lower level of growth is likely to persist in the near term due to Brexit and general economic uncertainty. Do I want to be throwing a ton of money into an asset class with low growth prospects? Not particularly.

Extra stamp duty and higher mortgage rates

Next, I dont like that fact that you have to pay extra stamp duty (an additional 3%) on buy-to-let properties as well as higher mortgage rates. Mortgage interest tax relief is also being phased out. To my mind, these extra costs and the removal of interest tax relief make the asset class far less attractive as an investment.

The hassle of it all

Finally, theres the hassle of investing in buy-to-let. Not only do you have to find good tenants who will look after your property and pay their rent on time, but you also have to take care of repairs and maintenance. And dont forget all the buy-to-let regulation that you need to stay on top of such as minimum space requirements and minimum energy efficiency standards.

All things considered, I think there are better investments than buy-to-let right now.

Heres where Ill be investing instead

One asset class that I will be investing in next year, however, is shares. In my view, shares offer a number of advantages over buy-to-let.

For starters, I really like the fact that you can invest 20,000 per year in shares through a Stocks & Shares ISA completely tax-free. This means that investing in shares can be very tax-efficient.

Secondly, I love how easy investing in shares has become. These days, you can open an account in just minutes and monitor your account and place trades from your smartphone wherever you are.

Thirdly, I like the fact that shares are very liquid. If you need access to your capital, its easy to sell some shares.

Finally, compared to buy-to-let, I see a lot more growth potential in shares, despite the fact that global equity markets have had a good run over the last decade. Given the growth that companies such as Apple, Microsoft, and Google are generating right now, I expect stocks to continue delivering healthy returns in the years ahead.

Do you keep a buy list of stocks? I do, throughout the year, and whenever my research and writing takes me to a tempting company, I add it to the list. If something attracts me several times, I start to consider it seriously. So which are my top candidates for my Stocks & Shares ISA going into 2020?

Dividend hero

A few investment trusts keep crossing my horizon, specifically those with long track records of raising their dividends. One of them is Caledonia Investments (LSE: CLDN), which has raised its annual dividend every year for 52 years. A small handful of others have managed 50 years or more, but Caledonias increases have beaten inflation for more than 20 years running too, and the preservation of real-terms rises is really what I like.

The yield is not one of the highest at around 2%, but the past five years have also produce a 34% share price gain, compared to 17% for the FTSE 100 and 21% for the FTSE All-Share. For a trust aiming to consistently achieve a long-term shareholder return in excess of the FTSE All-Share Total Return, while maintaining a progressive annual dividend, Id call that a success.

And with the shares trading on a 16% discount to net asset value right now, Caledonia Investments is likely to be my next share purchase.

Oil income

I recently sold my holding in Premier Oil, having belatedly decided Id made a mistake when I first bought it. I still like the idea of a smaller oil company, so Im looking at Gulf Keystone Petroleum (LSE: GKP) as a replacement in my ISA portfolio.

Until the agreement with the Kurdistan Regional Government was hammered out, bringing about regular payments, I would have suggested youd be mad to buy Gulf Keystone shares. But since then the company hasnt looked back though theres a bit of a caution right now as payments due in November and December have been delayed until January.

Gulf has come from close to the brink to returning surplus capital to shareholders, with a 7.5% dividend on the cards for the current year. And a further share buyback programme was announced in early December, extending the previous one.

Gulf Keystone is a strong buy candidate but I might wait until the January payment is received.

Cheap engineer?

Ive had my eye on Goodwin (LSE: GDWN), an oil, gas, and mining equipment engineer, for some time, and was surprised very recently to read of a 20% share price fall in response to first-half underperformance.

Were still waiting for renewed forecasts for the full year, but the cause of the companys 2019 troubles has been the seemingly perpetual blight that is Brexit uncertainty. But thats relatively short term, and the key strength I see in Goodwin is that its management team has a very long-term focus and the firm has built value for shareholders for decades now.

It has a global clientele, despite being a small company with a market capitalisation of only around 220m, and it seems to have no trouble building a long-term order book.

The shares are on a trailing P/E of 19.5, and offer progressive and well-covered dividends. And despite the share price shock, were still looking at a 12-month gain of 19%, which suggests robust (if slightly shaken) confidence.

Sometimes its not so easy to spot trouble in a company because the first thing we notice about a share is all the good things, such as a tempting valuation, a juicy dividend yield or impressive rates of growth in earnings.

But it pays to put your sceptical hat on when evaluating stocks and look beneath the attractions to make sure these three hidden pitfalls arent present. Ferret them out, and you could save yourself a fortune!

Bad management

The directors and managers of a business dont always perform well. Sometimes they try their hardest but just arent much good at it. Sometimes they are less than honest individuals and are working to a hidden agenda.

Warning signs can include excessive pay, easily achieved incentive schemes, related party transactions and frequent restructuring. If a firm is always fighting fires and trying new ways to make the business work out well, it makes me question the directors judgement in the first place. Id also look at the history with regard to acquisitions. Have they added value or destroyed it? And is the boardroom stable or are the directors being frequently replaced?

Given that we need to trust management to run, expand and optimise a business while we hold its shares, finding one with an effective management team is essential for a decent investment outcome.

Business models that dont work

Its surprisingly common to find businesses on the stock market that just dont work. You can pin this one down by looking at the numbers. If you see a record of volatile profits, low profit margins, and poor returns on equity or capital employed, you could be dealing with a poor business model. Worse still, shrinking revenues, periods of loss-making and poor cash flow are all things that screamavoid!

Broken balance sheets

A weak balance sheet will have the potential to pull the rug from under a company no matter how well it seems to be performing operationally. And your investment could go down with it.Look out for high levels of debt, pension obligations, leases and a big pile of unpaid creditors.

But not all debt is a bad thing. Sometimes it makes sense for a business, although the key is moderation, I reckon.

Buying the shares of a company that has a high debt load is a bit like buying the shares of a firm that doesnt have any debt with money weve borrowed ourselves. The upside is juiced up when things go well and the downside is exaggerated when things go poorly!

I reckon one of the best moves you can make in your quest to make a million in the stock market is to avoid big mistakes. And focusing on the potential for finding these three toxic conditions could help you do that in 2020 and beyond.

If I ask you whats the best reason for getting an ISA, I reckon its a sure fire bet that youd point to the tax savings. And yes, it really is the whole point (though there are other advantages shared with other types of investing accounts).

Any share price profits you accumulate in an ISA are free of capital gains tax, and theres no further income tax to pay on any dividends either. Now, you might point out that in the UK we have an annual capital gains allowance, and that stands at 12,000 in the 2019-2020 year.

Big savings

So that means you can sell shares up to a profit of 12,000 without paying tax. With the annual ISA allowance standing at 20,000, youd have to do unusually well for that to limit you in a year, so whats the point of an ISAs tax-free status? Well, one is that you have to actually sell shares to use your capital allowance and you cant buy them back again for at least 30 days.

But the biggest tax advantage is that theres no tax savings limit every penny in your ISA, for as long as you like, remains tax-free, and it could come to a tidy sum. If you can afford the full 20,000 ISA allowance every year for 20 years, youll have invested 400,000 in total. But if you earn 6% per year (which I think is a reasonable long-term objective), it will have grown to 760,000 and the 360,000 profit is all tax-free.

Top performance

If that profit example sounds good, thats because UK shares are about the best long-term investment you can find. A study by Barclays has found long-term total returns (share price appreciation plus dividends) of 4.9% ahead of inflation. So my 6% example above is actually quite modest.

Its also miles ahead of anything youre going to get from a Cash ISA. Right now, top variable rates come in at around 1.35%. You can get a bit more from a fixed-rate ISA, but it means tying up your cash for a fixed number of years and even then it wouldnt get you close to the expected long-term returns from a Stocks & Shares ISA.

Cash ISA interest is below inflation, so you actually lose money in real terms. What kind of investment is that?

Savings discipline

You could still enjoy the long-term returns from shares in a plain share-dealing account, but weve already seen what the tax savings could be worth from choosing an ISA instead. And I reckon an ISA provides a non-cash benefit too, in the more disciplined approach to investment it can inspire.

Pretty much any online investment account will let you transfer cash regularly, so its as easy to be as disciplined as with an ISA providing you have the willpower and motivation. But I find that having an annual limit and a deadline to use it encourages me to be more regular and consistent with my investing.

I know Ill never use up my full annual allowance, and it shouldnt matter whether I miss deadlines. But it does provide me with a psychological boost, and it really makes me focus on my investments in the last couple of months.