Investor mistakes are more common than you might think. In general, investor mistakes occur when the investor or trader makes a miscalculation on the trade of a stock. For instance, an investor may ignore a major change in regulations that could affect a market sector or some companies. By ignoring this change, he or she makes a mistake that could subsequently erode the value of the stock. Another example of investor mistakes is when a stock reverses its course on bad news that is specific to the company, and the investor ignores the change and holds the stock, only to see a greater loss. These are only a couple examples of investor mistakes that you need to be aware of.
One of the hardest things for a person to do is to go against the crowd. As investor sentiment starts to spread, an individual has an increasingly hard time looking past the short-term gyrations and focusing on the long term. This lack of ability to separate oneself from the herd of investor sentiment has led to a famous occurrence: that the majority of people are wrong when it comes to investments. By the time everyone starts to take part in an investment, this is when one should be looking to exit. Investing in stocks was viewed as a great investment, right before the crash. After the crash, investing in stocks was then viewed as a horrible place to put capital; but that was exactly the best time to buy stocks. One n ... Read More
One of the biggest investor mistakes, when it comes to trying to determine stock market winners, is what we professionals call “chasing returns.” This is one of many investor mistakes in which people look at what firms have recently performed well and incorporate these returns when analyzing which companies they feel will be the stock market winners in the future. The reason this is one of the most common investor mistakes is that it is easy to be tricked into thinking that past performance is an indication of future success. Stock market winners in the past can indicate that the company is a solid performer, but this is no guarantee that the same returns will continue indefinitely. Looking to analyze which compan ... Read More
When it comes to investing for the long run, investors must make sure that they make their investment decisions based on extensive analysis—not buy on rumors or “inside information.” Through thorough analysis, an investor can gain peace of mind. If you avoid these following common investor mistakes when investing, you can be a better investor over the long run and can witness your portfolio grow. Critical Mistake #1: Basing investment decisions on a company’s price-to-earning (P/E) ratio The P/E ratio is very commonly quoted in the financial media, but at the end of the day, by itself, this ratio doesn’t really tell you much about a company’s health. In essence, the P/E ratio is si ... Read More
Focus on the facts; investor, avoid these biases if you don’t want your portfolio to collapse.
Behavioral finance has provided great insights on how investors make their decision and how it affects their returns. Sometimes, investors build up biases and make their decision according to these biases without considering the amount of risk they are taking or where they are investing.
These biases can destroy an investor’s portfolio if they are in the world of investing for the long term. Consider this: in March of 2009, when the key stock indices hit rock bottom, was it a good time to buy into equities, or go against them? Obviously, at the moment, ... Read More
The housing slump in 2007 and the financial crisis following it left the U.S. economy in sorrow. Millions of Americans lost their savings due to the stock market collapsing to the lowest levels experienced in a while. Key stock indices in the U.S. have shed more than half of their value, and some of the well-known companies went underwater. Having said that, the key stock indices in the U.S. are back to where they were before the financial crisis began. But while the stock markets have recovered, many investors have lost courage to get back into the markets. What should investors do if they are unsure about investing in the stock market again? The most important thing investors need to keep in mind is ... Read More
40% of Retirees Have Mortgage Debt; Why It Could Be a Bad Idea for Those Over 65 to Leverage Assets for Wall Street
The Dow Jones Industrial Average has been on a record-breaking sprint, drawing in investors from the sidelines with optimism and high expectations. With weak bond rates, there is growing sentiment that many retirement funds will only experience modest returns unless they park their money in the stock market. At the same time, other investors are cautiously watching from the outside, wondering if there’s additional room to run. It’s hard to decide where the market is headed. While the Dow Jones is on a tear, it certainly can’t be based on the underlying economic indicators. Unemployment remains high—so does personal debt. Gross domestic product (GDP) is essentially flat. And the outlook doesnâ ... Read More