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Top Ten Investment Mistakes

1. Lacking an investment plan a/k/a/ "Don't take a trip without packing the map". A pre-planned asset allocation generates positive results and eliminates emotional panic selling.

2. Buying cheap stocks a/k/a "Road crews erect "Dead End" signs for a reason". Most stocks with low share prices also arrive at the bottom for a reason. There must be institutional interest to influence price, and many won't even glance at stocks below $8 or $10.

3. Purchasing story stocks a/k/a "A good fable lulls a child to sleep". Don't get taken by compelling "story" stocks. The plots include a cure for cancer, a big oil strike or a revolutionary invention. Such promising stories rarely prove true. If the "story" materializes, the company will still be a buy.

4. Selling your winners a/k/a "You gotta know when to hold 'em'". Don't sell your winners. These companies combine outstanding management, product and cash flow, creating steady growth for years. Holding these companies for the long run will compensate for other investing mistakes. In fact, one or two big winners can create real wealth.

5. Holding onto a peaked stock a/k/a "Trees don't reach to the heavens, and companies don't continue growth beyond reason". Top companies peak for reasons such as attrition of top management or competition. Systematic pruning will help you avoid a rotting, unhealthy investment.

6. Under diversification a/k/a "Ideas are good, but a mind full of them is better". Resist the urge to rely on a few stocks that you know. Lack of portfolio diversification leads to erratic and volatile returns, and owning several companies in the same industry also isn't diversification. The best investment results happen by investing in leading companies across various industries.

7. Over diversification a/k/a "A portfolio stretched like an old T-shirt won't help an investor benefit from their insight". You don't create diversification by spreading yourself too thin. Although a mind full of ideas is good, ideas acted upon on a whim waste good thoughts.

8. Over trading a/k/a "Replanting a garden every week won't produce high-quality tomatoes". Don't follow market "noise" and bounce from sector to sector or theme to theme. This prevents investors from enjoying the rewards of a long-term winner. Give stocks enough time to mature and compound.

9. Too much margin a/k/a "Living on borrowed time brings a rush of excitement, but it's a quick trip when time expires". Don't underestimate the damage margin can create. The relatively low cost and ease of obtaining leverage takes investors down a dangerous path. When a portfolio on margin declines rapidly, it can catch even experienced investors off guard.

10. Too many options a/k/a "In life there's always options, (but timing makes the difference"). When you buy options, you must be right and use impeccable timing. Options allow an investor to use leverage and control more shares but there are relatively high spreads involved in trading them. Many times investors lose money on their transaction even after they followed correct assumptions.

Mr. Kimmel is a private money manager and the author of "Magnet Investing, build a portfolio and pick winning stocks using your home computer". His methodology was the subject of a Forbes Magazine article (June, 2004).

Barbara Kimmel is an award winning publisher and publicist at Next Decade, Inc. (http://www.nextdecade.com).

In The News:

Casualties after Turkish high-speed train crashes
Thu, 13 Dec 2018 04:49:00 +0000
A Turkish high speed train has crashed into an overpass and two carriages have toppled over in Ankara.

Police release image of Christmas market attack suspect
Tue, 11 Dec 2018 19:37:00 +0000
French police have released a photo of the man suspected of killing two people and leaving another brain dead at a Christmas market in Strasbourg.

Grace Millane family: 'Our world turned upside down'
Wed, 12 Dec 2018 04:10:00 +0000
The family of a murdered British backpacker have said their "whole world turned upside down" after the 22-year-old's death.

Ex-lawyer jailed for covering up Trump's 'dirty deeds'
Wed, 12 Dec 2018 15:54:00 +0000
Donald Trump's ex-lawyer, Michael Cohen, has been jailed for three years over hush money payments to two women.

Hillary Clinton among partygoers at billionaire kids' wedding
Wed, 12 Dec 2018 20:54:00 +0000
Former US secretary of state Hillary Clinton and a host of Bollywood's biggest names were among guests as the daughter of India's richest man got married.



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