As any graduate of Alcoholics Anonymous knows, the first step to setting out on the proper path is admitting your weakness. In that spirit, I'm writing about my biggest mistake during the bear market. Here. Publicly. For the whole world to see.

After all, if legendary investor Peter Lynch of Fidelity Magellan fame could publicly admitto holding AIG and Fannie Mae at the end of 2008, what's an analyst like me got to lose?

I hope two things come of my story:

Mea culpa
My greatest investing failure of the past year has been my investment in Allied Irish Banks . To date, I'm down 61% (not long ago, I waved goodbye to more than 90% of my initial investment, but the stock has recently inched upward).

True, it's not quite as big a loss as those suffered by investors in Anthracite Capital (NYSE: AHR), CardioNet (Nasdaq: BEAT), Fairpoint Communications (NYSE: FRP), UCBH Holdings (Nasdaq: UCBH), and Citizens Republic Bancorp (Nasdaq: CRBC) over the past 12 months. But what consolation is a few percentage points' difference when you've lost 61% of your initial investment?

And yet, painful though that loss is, seeing how avoidable this was in hindsight hurts even more.

Perhaps the onlycomforting thought can be found in Warren Buffett's last Berkshire Hathaway annual report. Buffett writes that he also suffered a significant loss by investing in Irish banks. Some have speculated that AIB was among them. If so, at least I was fooled alongside a much better investor.

Following the crowd
I first went wrong in falling prey to social proof. I put too much weight on the research, opinions, and actions of others, without thinking through my investment decision for myself, and deciding whether it made sense in myportfolio.

Prior to my purchase of Allied Irish Banks, it had been recommended in our Global Gainsnewsletter service and purchased by the team heading up our real-money Million Dollar Portfolioreal-money service. Advisors in both services wrote that the stock was trading with low historical and relative multiples, a very attractive dividend yield, and a significantly undervalued price.

While they made compelling arguments, I failed to carefully evaluate whether I agreed with their assessments. And I became even more hooked as these fellow analysts also began purchasing Allied Irish Banks for their personal portfolios.

As a result, I also began to give in to confirmation bias -- where I sought out opinions that further confirmed my buy decision, rather than seeking a contrarian opinion that might indicate danger ahead.

Seth Jayson, co-advisor of our Motley Fool Hidden Gems newsletter service, recently shared with me that confirmation bias is one of the most common predispositions investors face. He explained that truly great investors develop an ability to honestly look at both sides of an investment thesis.

Anchoring in loose sand
As if those errors weren't enough, I also became anchored to the price at which each service recommended the stock. I fixated on those price points; in my mind, anything lower than their entry prices became a clear bargain.

So, when Allied Irish Banks fell another 50% from the most recently recommended price, the stock became twice as attractive to me, as did the doubled dividend.

These mistakes fed off each other, collectively convincing me to overlook my normal investment process. I took shortcuts. I failed to perform as much research as I typically do. I fell in love with the stock, viewing it as mostly upside, without truly understanding the risks and pressure points. And I didn't even consider the possibility of a suspended dividend (which later came true). Continued...