Investor Mistakes
How to Avoid the 7 Most Common Investor Mistakes And Build Steady Profits No Matter What the Markets Do
One of the most least understood truths of investing is this: Success in the game of investing depends more on not making investor mistakes than it does on picking big winners. Period.
Of course, finding a neglected small-cap stock and riding it to the stratosphere is exhilarating. And nothing compares to the pure satisfaction of the hunt. (My comment: HaiO!! and Latexx!!) But, as anyone who’s been around the financial markets for a long time will tell you, it just doesn’t happen very often.
The real pros understand that success comes from sidestepping the traps-specifically, the mistakes that lure the unwary investor into unrecoverable disasters.
Day in and day out, these pros follow a disciplined approach. They’re not swayed by talking heads and self-appointed market pundits who babble on about the next big thing. They’re confident in their ability to stay out of trouble and ride through the rough spots as they wait for the next good opportunity.
Click here to take a look at some of the top investor mistakes.
“Seven Deadly Sins of Investing.”
http://www.investmentu.com/resources/investormistakes.html
Investor Mistake #1: Following the “Saturday Morning Hero” Will Lead to the Promised Land of Investing
Investor Mistake #2: A Few Weeks Is Long Enough to Wait for Huge Profits
Investor Mistake #3: You Should Only Buy Soaring Stocks, Using “Insider Knowledge”
Investor Mistake # 4: Wall Street’s Wizards Will Hit Home Runs for You
Investor Mistake # 5: There’s Always Another Tech Run-Up Just Around the Corner
Investor Mistake # 6: If You Listen to Enough Televised Investing Reports, You’ll Learn Something Profitable
Investor Mistake #7: Watching the Markets and Predicting Them Is the Key to High Returns
Showing posts with label mistakes to avoid. Show all posts
Showing posts with label mistakes to avoid. Show all posts
Saturday 16 October 2010
Friday 11 June 2010
Common Stock Market Mistakes
Common Stock Market Mistakes
Jun.02, 2010
Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.
The first mistake that people tend to make when investing into the stock market is watching the news. The only thing the news is good for is making you panic and bringing emotions into the mix. You don’t need to watch the news to be a great trader. In fact staying away from other opinions and trusting yourself can be a bonus in the market.
The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,
One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.
But if you actually have a plan that is another story. If you bought a stock at $50 and planed to exit out at $65 or cut your losses short at $45 there is no point in getting out at $49 just because you are scared that you might actually lose more money. Create a plan and stick with it.
The last major mistake that people make is not limiting their losses. Having some plan on limiting your losses whether it be through diversification or stop losses and money management every successful market participant limits their losses.
If you work hard at it there is no limit to what you can do with the stock market. It can be a very powerful tool for creating wealth.
Jun.02, 2010
Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.
The first mistake that people tend to make when investing into the stock market is watching the news. The only thing the news is good for is making you panic and bringing emotions into the mix. You don’t need to watch the news to be a great trader. In fact staying away from other opinions and trusting yourself can be a bonus in the market.
The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,
One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.
But if you actually have a plan that is another story. If you bought a stock at $50 and planed to exit out at $65 or cut your losses short at $45 there is no point in getting out at $49 just because you are scared that you might actually lose more money. Create a plan and stick with it.
The last major mistake that people make is not limiting their losses. Having some plan on limiting your losses whether it be through diversification or stop losses and money management every successful market participant limits their losses.
If you work hard at it there is no limit to what you can do with the stock market. It can be a very powerful tool for creating wealth.
Tuesday 2 February 2010
Five important don'ts when you want to buy shares
Mistakes to avoid when you invest in equities
Do not buy on tips or rumours. Consult someone who has long experience of equity investment.
Do not buy with borrowed money.
Do not buy shares in boom times when everybody is buying and sell in bust times when everybody is selling. Or put differently: do not buy when shares are at a high and sell when they are at a low - you will make a loss!
Do not invest in a share that has been in the spotlight recently - the price might already have been driven up significantly.
Do not buy a share just because the price has dropped substantially and you think it is a bargain. There might be sound reasons why it has dropped.
Do not buy on tips or rumours. Consult someone who has long experience of equity investment.
Do not buy with borrowed money.
Do not buy shares in boom times when everybody is buying and sell in bust times when everybody is selling. Or put differently: do not buy when shares are at a high and sell when they are at a low - you will make a loss!
Do not invest in a share that has been in the spotlight recently - the price might already have been driven up significantly.
Do not buy a share just because the price has dropped substantially and you think it is a bargain. There might be sound reasons why it has dropped.
Friday 1 January 2010
Avoiding Mistakes is the Most Profitable Strategy of All
Learn the seven easily avoidable mistakes that many investors frequently make. If you steer clear of these, you will start out ahead of the pack. Resisting these temptations is the first step to reaching your financial goals:
1. Swinging for the fences
Don't try to shoot for big gains by finding the next Microsoft. Instead focus on finding solid companies with shares selling at low valuations.
2. Believing that it's different this time
Understanding the market 's history can help you avoid repeated pitfalls. If people try to convince you that "it really is different this time," ignore them.
3. Falling in love with products
Don't fall into the all-too-frequent trap of assuming that a great product translates into a high-quality company. Before you get swept away by exciting new technology or a nifty product, make sure you've checked out the company's business model.
4. Panicking when the market is down
Don't be afraid to use fear to your advantage. The best time to buy is when everyone else is running away from a given asset class.
5. Trying to time the market
Attempting to time the market is a fool's game. There's ample evidence that the market can't be timed.
6. Ignoring valuation
The best way to reduce your investment risk is to pay careful attention to valuation. Don't make the mistake of hoping that other investors will keep paying higher prices, even if you're buying shares in a great company.
7. Relying on earnings for the whole story
Cash flow is the true measure of a company's financial performance, not reported earnings per share.
1. Swinging for the fences
Don't try to shoot for big gains by finding the next Microsoft. Instead focus on finding solid companies with shares selling at low valuations.
2. Believing that it's different this time
Understanding the market 's history can help you avoid repeated pitfalls. If people try to convince you that "it really is different this time," ignore them.
3. Falling in love with products
Don't fall into the all-too-frequent trap of assuming that a great product translates into a high-quality company. Before you get swept away by exciting new technology or a nifty product, make sure you've checked out the company's business model.
4. Panicking when the market is down
Don't be afraid to use fear to your advantage. The best time to buy is when everyone else is running away from a given asset class.
5. Trying to time the market
Attempting to time the market is a fool's game. There's ample evidence that the market can't be timed.
6. Ignoring valuation
The best way to reduce your investment risk is to pay careful attention to valuation. Don't make the mistake of hoping that other investors will keep paying higher prices, even if you're buying shares in a great company.
7. Relying on earnings for the whole story
Cash flow is the true measure of a company's financial performance, not reported earnings per share.
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?
http://www.fool.com/investing/dividends-income/2009/12/15/what-was-your-worst-investment-mistake-in-2009.aspx
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?
http://www.fool.com/investing/dividends-income/2009/12/15/what-was-your-worst-investment-mistake-in-2009.aspx
Friday 26 June 2009
Nine Mistakes that Investors Make
Nine mistakes that investors make
1. Failure to diversify
2. Paying too much for a stock
3. Buying a stock with a high payout ratio*
4. Too much trading
5. Failure to read the company's quarterly and annual reports
6. Failure to invest in stocks after a long decline
7. Failure to keep adequate records (recordkeeping)**
*Stock with high payout ratio
Most companies need to invest their retained earnings to grow their business.
A low payout ratio is preferred, since it means that the company is plowing back its profits into future growth.
Examine what percentage of earnings per share are paid out in dividend. For instance:
1. Failure to diversify
2. Paying too much for a stock
3. Buying a stock with a high payout ratio*
4. Too much trading
5. Failure to read the company's quarterly and annual reports
6. Failure to invest in stocks after a long decline
7. Failure to keep adequate records (recordkeeping)**
*Stock with high payout ratio
Most companies need to invest their retained earnings to grow their business.
A low payout ratio is preferred, since it means that the company is plowing back its profits into future growth.
Examine what percentage of earnings per share are paid out in dividend. For instance:
- if the company earns $4 a share and pays out $3, that's too much.
- most would much prefer a company that paid out less than 50% - 30 or 40% would be even better.
Companies that don't pay a dividend at all are often very speculative. They can be extremely volatile.
Recordkeeping**
This is a common blunder. You should have a filing cabinet that holds a folder for each stock.
The first thing you should put in that file is the confirmation slip for the purchase of the stock, which should have been sent to you by your broker.
Then when you sell the stock, you will know what you paid for it so that you can tell your accountant. He will in turn tell the IRS.
Monday 11 May 2009
Mistakes to Avoid - Ignoring Valuation
Ignoring Valuation
Although it's certainly possible that another investor will pay you 50 times earnings down the road for the company you just bought for 30 times earnings, that's a very risky bet to make.
Sure, you could have made a ton of money in CMGI or Yahoo! during the Internet bubble, but only if you had gotten out in time. Can you honestly say to yourself that you would have?
The only reason you should EVER buy a stock is that you think the business is worth more than it's selling for - not because you think a greater fool will pay more for the shares a few months down the road.
The best way to mitigate your investing risk is to pay careful attention to valuation.
If the market's expectation are low, there's a much greater chance that the company you purchase will exceed them.
Buying a stock on the expectation of POSITIVE NEWS FLOW or STRONG RELATIVE STRENGTH is asking for trouble.
Ignoring valuation will come back to haunt many people in the subsequent years.
Although it's certainly possible that another investor will pay you 50 times earnings down the road for the company you just bought for 30 times earnings, that's a very risky bet to make.
Sure, you could have made a ton of money in CMGI or Yahoo! during the Internet bubble, but only if you had gotten out in time. Can you honestly say to yourself that you would have?
The only reason you should EVER buy a stock is that you think the business is worth more than it's selling for - not because you think a greater fool will pay more for the shares a few months down the road.
The best way to mitigate your investing risk is to pay careful attention to valuation.
If the market's expectation are low, there's a much greater chance that the company you purchase will exceed them.
Buying a stock on the expectation of POSITIVE NEWS FLOW or STRONG RELATIVE STRENGTH is asking for trouble.
Ignoring valuation will come back to haunt many people in the subsequent years.
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