Stock market advice 3 common investor errors to avoid
Post on: 4 Май, 2015 No Comment
Over the past few months, weve periodically looked at common mistakes most investors make, and given you our advice on how to avoid them. Here are 3 more common errors all investors make from time to time.
- Following an unrealistic investment strategy: Some investors, particularly newcomers, plan to buy a few hot stocks (or funds, or options or futures), and double or triple their money in a few years. Then theyll settle into a low-risk investing style that may only return an average 10% to 12% yearly. But if you could make 200% or 300% in a few years, why would you quit? If you could do it once, you should be able to do even better as you gain experience.
Of course, if you doubt that you can keep it up indefinitely, you should also question whether you can pull it off the first time. Our advice is that the best approach for you is one that will work for you more-or-less indefinitely. Youll want to be sure it suits your circumstances and temperament, that it wont take up too much of your time, and that it doesnt require luck or extraordinary circumstances for success.
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- Buying new issues: As part of our stock market advice, we continue to recommend that you keep new issues out of your stock portfolio. Most come to market when its a good time for the company and its insiders to sell. This may not be, and often isnt, a good time for you to buy.
New stock issues start out with a big marketing push by the firm that sponsors them. When the initial hoopla ends, hidden risks can emerge. This can spur deep price declines in the new issue that go on for years.
Our stock market advice is to avoid new issues until theyve survived at least one recession. By then, hidden risk has often come out in the open.
When these stocks fall out of favour, the drop in your returns can be breathtaking. It can also take years for such stocks to recover.
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