Mistake #1: Getting married to your stocks
Human beings long to be loved for long periods of time and that’s why so many of us go the route of marriage. Over the past 100 years the US stock market has risen dramatically so those who invested long-term and “got married” to their stocks have been rewarded handsomely.
But times change, nowadays many marriages end in divorce, many should end sooner than later and the US stock market does not reward long-term investors as it once did as exemplified by the lost decade 2000-2010 where most investors only broke even or endured losses. Don’t get married to your stocks; think of them more as teenage love affairs – passionate and most definitely fun, but not lifelong relationships.
Mistake #2: Not Accepting And Taking Losses
We are all wrong at various points in our lives, but we usually can cut our losses and move on instead of not acting and wallowing in self-pity. Especially in the stock market. Sadly, far too many people refuse to accept their financial losses and do everything they can to avoid dealing with their mistakes. They double up on their position, or even triple up, as the price goes against them, rationalizing that by dip-buying, they will eventually enjoy greater rewards when proven right.
But because most traders and investors lose in this game, adding to a losing position usually only adds to their pain in the end. Don’t put yourself in this situation; losses can be a very slippery slope and most big losses begin as small losses that can be cut quickly by admitting the mistake and moving on.
Mistake #3: Trusting Tips
Friends, family, co-workers: everyone loves speculating on stocks; it’s practically a national pastime! Unfortunately, academic studies show that tips and the majority of people who invest and trade based on their gut lose more times than they win and the odds of success are worse than going to casino.
Don’t give into the urge to gamble in the stock market. If you want to invest, buy quality blue-chip companies, and remember not to get married to them for life, and ignore speculative, longshot tips.
- by Timothy Sykes
Human beings long to be loved for long periods of time and that’s why so many of us go the route of marriage. Over the past 100 years the US stock market has risen dramatically so those who invested long-term and “got married” to their stocks have been rewarded handsomely.
But times change, nowadays many marriages end in divorce, many should end sooner than later and the US stock market does not reward long-term investors as it once did as exemplified by the lost decade 2000-2010 where most investors only broke even or endured losses. Don’t get married to your stocks; think of them more as teenage love affairs – passionate and most definitely fun, but not lifelong relationships.
Mistake #2: Not Accepting And Taking Losses
We are all wrong at various points in our lives, but we usually can cut our losses and move on instead of not acting and wallowing in self-pity. Especially in the stock market. Sadly, far too many people refuse to accept their financial losses and do everything they can to avoid dealing with their mistakes. They double up on their position, or even triple up, as the price goes against them, rationalizing that by dip-buying, they will eventually enjoy greater rewards when proven right.
But because most traders and investors lose in this game, adding to a losing position usually only adds to their pain in the end. Don’t put yourself in this situation; losses can be a very slippery slope and most big losses begin as small losses that can be cut quickly by admitting the mistake and moving on.
Mistake #3: Trusting Tips
Friends, family, co-workers: everyone loves speculating on stocks; it’s practically a national pastime! Unfortunately, academic studies show that tips and the majority of people who invest and trade based on their gut lose more times than they win and the odds of success are worse than going to casino.
Don’t give into the urge to gamble in the stock market. If you want to invest, buy quality blue-chip companies, and remember not to get married to them for life, and ignore speculative, longshot tips.
- by Timothy Sykes
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