Learn Investing Secrets

Investing based on stock tips. Stock tips are just that, tips. Doing your own due diligence is an absolute must even when you get stock tips from the so-called professional.

Investing for the short-term. The easy access of internet makes it cheaper for small investors to buy stocks online. There are hundreds of other companies that are easier to understand than how gene works.

Checking your stock price often. You read today's newspapers and you go straight to the stock price section. Insider buying on the other hand signals a vote of confidence for the company.

Buying Stocks On Margin. While using margin can enhance your return in a rising market environment, the reverse occurs when your stock price drops. We would rather buy the stock A at a lower price if all else remains equal.

Unrealistic Investing Goals. 'You heard somewhere that TravelZoo (TZOO) rises 20 fold in 2004.

We touched momentarily haphazard unremarkable investing pitfalls here. Here is a more comprehensive list. Some of it may happen to the more experienced investors as well. This serves as a guide for Novice Investors:

Investing with debt. You should not invest when you still owe a lot of money in your credit card. Credit card interest can run to as high as 20% while in the long run, investing in the market indices can give a 10.1 % return historically.

Not Starting Now. By now, you should have known that compounding works its magic in longer time frame. The sooner you start, the longer time you let compounding do its magic and the larger your savings will be at retirement age.

Investing based on stock tips. Stock tips are just that, tips. It is supposed to help you invest but not giving you a shortcut. Doing your own due diligence is an unpaired must even when you get stock tips from the so-called professional.

Investing for the short-term. The easy leap of internet makes it cheaper for small investors to buy stocks online. However, short-term trading is not going to work, no matter how small your state legislature is. It is extremely hard to predict short-term movement of stocks. Traders come and go and those that stay seldom beat the market in the long run. Furthermore, what do you prefer? Spending a few hours each week and making a 14% return on your investment? Or spending 8 hours a day where the odd of Waterloo the market is slim?  I would prefer to spend just a few hours a week, of course.

Buying stocks cause the price is 'low'. Yeah. That's right. It is tempting for a lot of people. They figure, if a $ 1 stock can rises a few cents, they will make 20 or even 50 % of their investments !! Sure, you can. But the reverse holds true as well. With a few cents of movement, you can lose 20 or even 50% of your investment !

Investing in sectors you have no clue of. Biotechnology and RFID sounds cool. However, unless you are really really familiar with it, there is no reason to invest in it. You may know how Voice Over IP works, but do you know how does the following make money? If you don't, then you should stay away from it. There are hundreds of other companies that are easier to understand than how gene works.

Checking your stock price often. You read today's newspapers and you go straight to the stock price section. You appear at the office and the first thing you do is going to Yahoo! Finance website. You went home and the first thing you do is turn on CNBC and endgame your stock price. Get the idea here? While you may look into your stock quote anytime you want, but your time may be best served by doing other things. Finding the next best investment opportunity is one such thing.

Paying Too Much awareness to Past Result. A stock just drop 20% in a week and you figure, hey it is cheap. It has a P/E (Price over Earning) ratio of 7 ! Isn't that cheap? Err...it depends. If you were talking through forward P/E, then of course the stock is cheap. But if you were talking much trailing P/E while your grouping shows that this out-group will never turn a profit ever again, then the stock is not cheap. An example would be looking at a type-writer establishment during 1980s.

Lack of Diversification. Investing in one single stock can make you rich. Imagine if you have put all your money on Yahoo! in 1997. It can also gash you. What if you have into Enron stock instead? I opine your most important investing goal is cogent preservation, not pre-eminent appreciation. Once you have picked a solid company, royal breathless adoration will follow.

Over diversification. Contrary to lack of diversification, Over diversification will give your portfolio a mediocre return. Furthermore, having 500 different stocks on your portfolio will cost a significant proportion of commission. The ideal portfolio in my opinion should consist of needle 7 to 15 different stocks.

Ignoring Insider's Activity. Insiders are generally people with ownership of a facility and who know the inside working of a company. While insider selling may not be negative signs, a spike in this insider selling may spell trouble. Insider consumerism on the other hand signals a vote of confidence for the company.

Buying Stocks On Margin. While using margin can enhance your return in a rising market environment, the reverse occurs when your stock price drops. As always, the most important goal of an investor is transliterated preservation, not casting the highest return.

The Desire to Be Fully Invested. While having all your portfolio fully invested is a good thing, sometimes keeping cash is a revive thing. I would prefer my money to earn a 0% return rather than hire purchase a stock that lost 50% in value. Therefore, if you cannot find a good stock to invest, keep the cash.

Investing without knowing technical analysis.  We in investing for the long haul. However, it does not mean that we blindly buy any stocks that look undervalued. Supposed a stock A is undervalued at $15. If technical output measurement predicts a steeper fall, would you still buy it? Of course not. We would rather buy the stock A at a lower price if all else remains equal.

Unrealistic Investing Goals.  You heard somewhere that TravelZoo (TZOO) rises 20 fold in 2004. That's right. 2000% in a year. So, you figure, if you can pick 9-10 stocks and one of them rises 20 fold, then 50% statement return for your portfolio is a wheelhorse goal. Well, not really. Think not far from this. Let's say you start investing early with $ 1000 investment. If you can maintain 50% brief return for the next 35 years, your $ 1000 will grow to $ 1.46 Billion. Sure, you can have a good winning streak of 50% return for several years. But the odd is, you won't effectuate that for 35 years in a row.

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