7. Getting greedy
The first time I made money on a stock, I was hooked. I went from stable, thoughtful investor to wild speculator overnight.
Thankfully, my father stepped in and convinced me to stop sprinting and start walking again. If he hadn’t, I probably would have blown my entire savings.
8. Paying too much attention
There is such a thing as information overload. Between the internet, newspapers, magazines and cable TV, it’s easy to get more than your fill of conflicting information.
Step back, look at the big picture and find a few financial journalists or others you trust. Then, tune out the rest.
9. Following the herd
Billionaire investor Warren Buffett has said, “Be fearful when others are greedy; be greedy when others are fearful.”
Many of the stocks Stacy owns were purchased when the Dow Jones Industrial Average was below 7,000 and nobody was buying — an example of being greedy when others are fearful.
His logic is as follows:
“If you’re convinced the economy is going to zero, buy guns and canned goods. But if you can reasonably expect a recovery someday, invest — even if that day is a long way away, and even if it’s possible things could get worse before they get better.”
10. Holding on when you should be letting go
Stocks are best played as a long-term game. You should hold on to stocks long enough to see a good return. However, if you don’t know when to get out, it can cost you big. Companies can go bankrupt, for example.
So while you shouldn’t obsess over your investments, you shouldn’t ignore them either.
11. Being overconfident
The economy runs in cycles of boom and bust. When times are good, people often confuse luck with skill.
Such misunderstanding arguably played a role in what happened during the housing bubble and the dot-com bubble that preceded it. Being in the right place at the right time isn’t the same as being smart.
12. Failing to adjust
How you invest should change as your life changes. When you’re young, it makes sense to invest aggressively, because you have time to recoup from mistakes. As you approach retirement age, you should reduce risk.
The Great Recession wiped out the savings of many people who were on the verge of retirement. That shouldn’t have happened, because they shouldn’t have had that much exposure to stocks so close to retirement. Check out “Build a Successful Retirement Plan With These 5 Steps” for tips on avoiding such a fate.
13. Not seeking qualified help
Investing isn’t rocket science. But if you don’t have the time or temperament, consider getting help.
The wrong help? That would be commissioned salespeople more interested in their financial success than yours. The right help? A fee-based planner with the right blend of education, credentials and experience. Check out “3 Questions You Must Ask When Seeking Honest Investment Advice” for tips.
If you’ve made mistakes or have advice that could help others, let us hear from you by commenting below on our Facebook page.