Common Mistakes Investors Make And How To Avoid Them

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Playing Without Rules

  1. Investing is an emotional game
  2. You will make decisions that are not logical
  3. Avoid this by creating rules:
  • what market you will invest in
  • How much you allocate to each investment
  • Limit your risk and reserve your capital
  • Know what you can lose, not what you can make
  • Have an exit strategy

Ignoring Taxes and Fees

  1. You may need a bigger gain than you think
  2. Purchasing stocks can cost $10
  3. Taxes can eat up 35% of profits
  4. Does your mutual fund have a load fee?
  5. Know your options to reduce/eliminate costs
  • Invest in the same mutual funds without fees
  • Eliminate trading fees all together
  • Reduce taxes

Confusing Investing with Trading

  1. Investors are not stock traders
  2. Traders get in and out of markets quickly to produce an income
  • Often highly leveraged to increase earning potential

3.  Investors buy companies

  • Interested in the long term profitability of a company
  • Ignore day-to-day activity
  • Understand the power of compound interest

Media Influence

  1. The stock market is driven by emotion
  2. The media creates hype, panic, excitement and uncertainty
  3. Even the best investors can not predict the market
  • What makes these pundits experts

4.  Today’s news rarely influences long-term capital appreciation.

Taking Too Much Risk

  1. “First rule of investing is don’t lose money. ”
  2. Losing 50% requires a 100% gain to break even
  3. You can’t win every time, but avoid loss as much as possible
  • Use to research stocks/funds
  • Only invest in what seems to be a sure thing
  • Have an exit strategy. Dump your losers

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7. Disclaimer

  • Consult with a certified financial planner before making any investment decisions.

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