Jan 14, 2010 How to Lose Your Money on the Stock Market
Business is good. Sales figures are up. Profits are up.
What to do with the surplus you ask? Many turn to the stock market, however business success doesn’t automatically mean investing success.
My good friend Jason Fittler of RBS Morgans offers us some sage advice.
The 10 Most Common Mistakes in Investing
1. Treating stocks like property. You should never buy stocks and simply just hold. You must keep up to date with what is happening to your company. Companies are living breathing entities; in short they are people making decisions - some good, some bad. A house is a lump of concrete which goes up and down based on the economy, a company can change focus and the price can over shoot, as such regular monitoring of your stocks makes sure that you take advantage of the opportunities and cut any losses.
2. Focusing on transaction costs not profit. If you’re worried about the transaction costs on a investment chances are it is not a good investment. Profit is what counts not costs.
3. Trying to cherry pick only good investments. What happens in the market is out of your control, to reduce risk you need a diversified portfolio. Some shares will go bad it is a fact of investing, deal with it and move on.
4. Buying hot tips. You might hear one of these a year. I hear about 20 a week. 99% fail.
5. Using discount brokers. Yes they are cheap, but you need to put in considerable time to make sure you have researched your stocks and keep up to date with current issues in regards to your stocks. If you do not work this would suit. If you do work, always consider if you will make more money working a little longer and paying someone to look after your investments or by spending your time on doing the investments yourself.
6. Buying magic software. (Charting programs) These are a scam. If the program was fool proof why sell it to the public you would make way more money trading with it.
7. Holding bad stocks. If a stock does not turn out how you plan, sell it and move on. Nothing is gained by holding.
8. Not taking profits. Do not hold a stock and try and suck out every dollar. If you make a good gain take it and move on. You will never go broke taking a profit.
9. Not sticking to the game plan. If you buy a stock for a short term gain, only hold short term. If the announcement does not come, get out and move on. If you are buying for a long term hold and the price dips, continue to hold for the long term. Stick to the game plan, know when you will sell before you buy.
10. Taking advice from the media, friends, family or taxi drivers. Get professional advice. Do the research or pay someone to do the research. Investing is a long term full contact sport.
Are you making any of the above mistakes?
Jason sends out a newsletter with advice like this every week.