Avoid Major Mistakes When Buying Stocks
For many investors, avoiding major investment mistakes is the key to making spectacular investments. Here are some mistakes to avoid which were listed in an article in the AAII Journal of the American Association of Individual Investors:
Common Stock Investment Mistakes
- Don’t invest in a stock that has been spotlighted in the news recently
- Don’t hang on to a sagging stock waiting for the price to bounce back so you can “get even and get out”
- Don’t let your natural disdain for paying taxes overcome your evaluation of the merits of continuing to hold a stock
- Don’t buy a stock because it recently had a substantial drop in price
- Don’t buy a stock solely because you like the product the firm makes
- Don’t buy low price-earnings ratio or low price-to-book-value ratio stock without knowing why the price-earnings ratio or price-to-book-value ratio is low
- Don’t concentrate in one industry or in highly related industries
- Don’t rely on “safe” stocks to reduce risk
- Don’t invest in common stocks with money you may need in less than five years
- Don’t move abruptly into or out of the stock market with a significant portion of your investment portfolio
