1. Lacking an investment plan a/k/a/ "Don't take a trip without packing the map". A pre-planned asset allocation generates positive results and eliminates emotional panic selling.
2. Buying cheap stocks a/k/a "Road crews erect "Dead End" signs for a reason". Most stocks with low share prices also arrive at the bottom for a reason. There must be institutional interest to influence price, and many won't even glance at stocks below $8 or $10.
3. Purchasing story stocks a/k/a "A good fable lulls a child to sleep". Don't get taken by compelling "story" stocks. The plots include a cure for cancer, a big oil strike or a revolutionary invention. Such promising stories rarely prove true. If the "story" materializes, the company will still be a buy.
4. Selling your winners a/k/a "You gotta know when to hold 'em'". Don't sell your winners. These companies combine outstanding management, product and cash flow, creating steady growth for years. Holding these companies for the long run will compensate for other investing mistakes. In fact, one or two big winners can create real wealth.
5. Holding onto a peaked stock a/k/a "Trees don't reach to the heavens, and companies don't continue growth beyond reason". Top companies peak for reasons such as attrition of top management or competition. Systematic pruning will help you avoid a rotting, unhealthy investment.
6. Under diversification a/k/a "Ideas are good, but a mind full of them is better". Resist the urge to rely on a few stocks that you know. Lack of portfolio diversification leads to erratic and volatile returns, and owning several companies in the same industry also isn't diversification. The best investment results happen by investing in leading companies across various industries.
7. Over diversification a/k/a "A portfolio stretched like an old T-shirt won't help an investor benefit from their insight". You don't create diversification by spreading yourself too thin. Although a mind full of ideas is good, ideas acted upon on a whim waste good thoughts.
8. Over trading a/k/a "Replanting a garden every week won't produce high-quality tomatoes". Don't follow market "noise" and bounce from sector to sector or theme to theme. This prevents investors from enjoying the rewards of a long-term winner. Give stocks enough time to mature and compound.
9. Too much margin a/k/a "Living on borrowed time brings a rush of excitement, but it's a quick trip when time expires". Don't underestimate the damage margin can create. The relatively low cost and ease of obtaining leverage takes investors down a dangerous path. When a portfolio on margin declines rapidly, it can catch even experienced investors off guard.
10. Too many options a/k/a "In life there's always options, (but timing makes the difference"). When you buy options, you must be right and use impeccable timing. Options allow an investor to use leverage and control more shares but there are relatively high spreads involved in trading them. Many times investors lose money on their transaction even after they followed correct assumptions.
Mr. Kimmel is a private money manager and the author of "Magnet Investing, build a portfolio and pick winning stocks using your home computer". His methodology was the subject of a Forbes Magazine article (June, 2004).
Barbara Kimmel is an award winning publisher and publicist at Next Decade, Inc. (http://www.nextdecade.com).
I recently received an e-mail from a young lady who... Read More
It always amazes me how much stock market investors resemble... Read More
The economic data reported Fri showed continued above trend growth... Read More
There maybe several reasons why you to want to invest... Read More
It is important to note that every smart investor wants... Read More
One of the leading traders on Chicago Mercantile Exchange, because... Read More
In less than four years, the price of oil has... Read More
An Ira is one of the greatest ways to save... Read More
Putting Rare Coin Market Cycles to Work for You...Until recently... Read More
I've been involved in online trading, specifically with stock and... Read More
AbstractA very slim minority of firms distribute dividends. This truism... Read More
The Foreign Exchange Market, better known as FOREX, is a... Read More
What really controls the economy? Forget interest rates, forget deficits,... Read More
You wouldn't build your home on anything less than a... Read More
If Johannes Kepler, the renowned 17th century astronomer and discoverer... Read More
One important aspect of trading the markets is to understand... Read More
There are several reasons people give for not investing their... Read More
1. Begin investing immediatelyProcrastination is the number one enemy of... Read More
There is a tremendous amount of software, complicated high priced... Read More
How much are you willing to pay for a tank... Read More
Gearing is where you borrow money to invest. As already... Read More
The first point to mastering money management is that you... Read More
Where is the second biggest deposit of oil reserves in... Read More
Financial Spread Betting (or Trading) offers a tax free method... Read More
We've helped a number of clients develop business plans and... Read More
Over the course of the past two months, readers have... Read More
This column has often focused on intangible investments like stocks... Read More
It is important to answer the following questions before you... Read More
I've been in and interested in the stock market so... Read More
Motivational guru Tony Robbins teaches that the reason for doing... Read More
Let's face it, you're on a roll. After getting down... Read More
If you are looking for a safe investment and you... Read More
I submit that the successful day trader would profit well... Read More
Death and taxes! The certainties of life! And then, of... Read More
1. Begin investing immediatelyProcrastination is the number one enemy of... Read More
It always amazes me how much stock market investors resemble... Read More
You've probably heard about people who keep their money offshore.... Read More
It is a common question when investors review their retirement... Read More
In an ideal world you would start your working career... Read More
Recently, my family and I took a trip to Maine... Read More
I submit that the successful day trader would profit well... Read More
Let me tell you about some legal ways to avoid... Read More
Non-indexed mutual funds try to keep it secret that actively... Read More
If you want to make the most of your personal... Read More
The last time you spoke with your broker did he... Read More
You might think that if you win the lottery or... Read More
Okay, so I can tell you I have sat in... Read More
I said last week that money doesn't generally buy happiness,... Read More
As a trader, one of the key things that I... Read More
Motivational guru Tony Robbins teaches that the reason for doing... Read More
Let's see, he had some oats, fresh alfalfa and his... Read More
A barrel of oil bounced to over $60 Thu, which... Read More
If you want to retire rich, start saving investing early.... Read More
This article attempts to help give the investor a broader... Read More
An Ira is one of the greatest ways to save... Read More
Need some insight on what you should really be striving... Read More
The USS Constitution first ventured into the waters in 1798.... Read More
By definition, value investing is the process of selecting stocks... Read More
We have all heard that slogan that started back when... Read More
The following perspective on (day) trading comes from my many... Read More
Arthur Levitt, during his tenure at the SEC, experienced many... Read More
This column has previously discussed "picturing the future that we... Read More
Let's start by saying: You can't be afraid to take... Read More
One of the greatest preconstruction investing issues that I hear... Read More
Soft dollars, a form of legal kickback, is a sly... Read More
A Savings Incentive Match Plan for Employees plan, better known... Read More
Investing |