Wednesday, 16 December 2009

What Was Your Worst Investment Mistake in 2009?

What Was Your Worst Investment Mistake in 2009?
By Dan Caplinger
December 15, 2009

In 2008, nearly everybody made bad investments. By comparison, 2009 was a complete delight.

Still, investors made mistakes. Even with the huge rally, some stocks, including Valero Energy (NYSE: VLO), MetroPCS (NYSE: PCS), and Apollo (Nasdaq: APOL), managed to drop this year. In addition, Treasury bonds, which rode high during 2008, also knocked investors for a big loss this year.

What might have been
Personally, though, my biggest mistake this year was in cutting my winners short. The decision to take some profits on part of my positions in Starbucks (Nasdaq: SBUX) and Freeport-McMoRan (NYSE: FCX) well into the rally seemed like a no-brainer at the time, but those stocks just kept going up. Similarly, I trimmed my holdings in junk bond mutual funds and some international bonds, figuring that gains might well prove short-lived. Although that didn't cause any losses, the opportunity cost of getting out too early was extremely high.

There's a lesson in that. Plenty of investors are smart enough to buy top performers like Apple (Nasdaq: AAPL) and Green Mountain Coffee Roasters (Nasdaq: GMCR), and a good number of them earn decent profits from them. But only the most disciplined, patient investors stick with those winners for the long haul, squeezing every penny of potential gain out of their shares and turning a modest winner into a gold mine for their portfolio.

How about you?

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