Quite frankly, a headline like this would probably attract a large number of people. Who wouldn’t be interested?---probably the ones that aren’t willing to accept ANY level of risk on their investment capital. These investors are actually losing money on the ‘risk-free’ part of their portfolio. The sustained low interest rates on money market and such like accounts actually erode investor purchasing power, but today we will be discussing what an investor should avoid to achieve profits while managing the risk of losses.
Counting on picking winners—there are many more investment losers than ‘home runs’. Invest on a regular basis; don’t try to pick the next top stock -Hanging onto loser stocks. You may have to crystallize a loss, but there is a time to consider selling a consistent drag on your portfolio
Forever holding onto winning stocks. Sell signals apply to the stocks that have made you money as well as the ones that haven’t -Thinking of the stock market as a gamble. The market isn’t a casino; a small brokerage account will allow you to speculate or play the market.
Listening to ‘hot tips’ from your friends, neighbours and the person at the next table at lunch. Rumours and speculation can run up the price of a stock while you jump on in time for the ride down. -Putting all your eggs in one basket. While the Company you work for may be a good employer, don’t invest too much in it. Remember Enron.
Deciding to be a hands on investor is not enough, you have to invest time Forgetting the past—who remembers the excitement and can’t lose feeling of the tech boom. Gold touched $700 US an ounce the day this article was written, Canadian dollar hit over .90 cents and oil over $70.00 barrel. Have we seen this in the past and who remembers what followed?
Avoiding the above mistakes does not guarantee no losses, but it certainly ensures you aren’t walking through the myriad of investments with a blindfold on. If you don’t have the time or inclination to do any or all of the above; it may be time to meet with a financial advisor; you can spend your time doing what you enjoy and capitalize on their education, experience and research.