Wednesday, June 09, 2010

Stock-market mistakes

One of the dumbest thing man does is to buy or avoid a stock because of its name. Yet many smart men and women sometimes commit this fault. We all make mistakes. There are none so smart who do not err and none so stupid who are never smart. The difference is that the smart make the right moves most of the time; the stupid do the opposite.

Failures in the stock market fail because they just listen to tips. They fail to do a due diligence before they buy. They are either too busy or simply do not have the knowledge to do a fundamental analysis on the stock. Here are some common mistakes people make:

1) Holding on to a falling stock just to get out even.

2) Taking profit too early.

3) Listening to a hot tip without doing a due diligence.

4) Allowing small price movements to frighten you out of an investment.

5) Depending too much on the PE Ratio when looking for a good stock to buy.

6) Confusing low-priced stocks with cheap stocks.

7) Changing your strategy when it works.

8) Going for the laggards rather than the leaders.

9) Thinking that big is safe and not realizing that small-cap stocks have great potentials to become big.

10) The worst mistake is that you do not know that you do not know.