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).

---

The Power of Small Numbers: Trading Success is Based on Consistency, Not Home Runs

Online trading is so seductive - just sit, click, and rake in the profits! But as anyone who has ever seriously attempted online trading will probably tell you, it's just not as easy... Read More

How To Start Investing For Financial Independence, Part 1

Today, I am going to start a multi-part series about how to go from being a beginning investor to being "financially independent" in a steady and predictable way. At our website, we get... Read More

Profitability And Stock Turn Rate

The inventory of the typical store represents the largest single element of its total assets. The sale of goods from this inventory is the merchant's chief source of operating profit. Thus, the way... Read More

Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money

To create momentum in your options trading you need to understand the advantages and disadvantages of at-the-money options, in-the-money options and out-of-the-money options.An at-the-money option has both advantages and disadvantages over stock and... Read More

Powerful Hidden Techniques Mystery Formula - The Covered Call Option Trading Buy-Write Strategy

For better or worse, most option trading investors purchase stocks with the intent of holding their shares for an extended period of time.We do this mainly because the media and industry professionals have... Read More

401(k) Plans

I've been in and interested in the stock market so long (one year shy of forty years) I can remember when the mutual fund pages in my home town paper were just one... Read More

Creating a Financial Future - Putting Your Plan Into Action Part 1

This column has previously discussed "picturing the future that we desire", and outlining a plan to achieve it. We mentioned that the plan must include goal-setting, measurement, and implementation. That implementation is this... Read More

Chinas Inscrutable Currency Strategy

Purpose: Expose Opportunities for Smart InvestorsThe move by China's central bank to drop the yuan's rigid peg to the dollar on the day of my return after a three-week trip to Asia left... Read More

Investing for Retirement - Not an All or Nothing Play

In 1519, Hernando Cortes, beached on the shores of unexplored Mexico, made a fateful decision: he would burn the ships he and his men arrived in and attempt to overthrow Montezuma and the... Read More

Five Sure Fire Way to Secure Your Financial Future

"You can be poor when you're young, but you can't be poor when you're old." That was the tag line used some years ago in a financial services television commercial.Truer words were never... Read More

Sell Discipline for Investors: Importance and Execution

Investors usually don't have an aversion to buying an asset. The real gut wrenching decision is when - and if - to sell. What most don't realize (or don't want to realize) is... Read More

Is Offshore Banking for You?

You've probably heard about people who keep their money offshore. Most likely you assume they're all wealthy businessmen; millionaires, who have so much money they somehow 'qualify' to move it out of the... Read More

Advice for International Investors on How to Safeguard Their Profits

What are the risks?Today, investors are increasingly turning to global markets to find opportunities for profit, giving urgency to the issue of protecting returns from foreign exchange risk. While there are many excellent... Read More

Short Term Savings Products

When you invest, it simply means that you are putting your funds in products, in this case short-term savings vehicles, which will allow you to reap high financial rewards.Here is a list of... Read More

Finding the Perfect Company

The perfect company - it's the holy grail of the investment world. The company that will make its initial investment hundreds of times over. It's what everyone shoots for. To have bought Microsoft... Read More

Ask The SEC

Who is the SEC and why should I ask them anything? The Securities and Exchange Commission in Washington, DC is the government bureau that regulates the securities industry. They make the regulations that... Read More

What Is A Fair Market Value, Really? If Youre Going To Trade, Be Sure Its Worth It!

I've been involved in online trading, specifically with stock and index options, for several years. In this time, I've spent a great deal of time thinking about value and the fact that anything,... Read More

Annuity Investment Guide

While there is not a lack of information on annuities, there certainly is a lack of good information. In an age full of information, we are constantly bombarded with irrelevant data. Annuities are... Read More

When It Comes To Investing, Asking The Right Questions Can Help You Make The Right Decisions

Are you ready to open your pathway to financial independence?Well you should be. The sooner the better. But, how do you get started?There is so much to know about investing and the truth... Read More

Annuity Owner Mistakes

Okay, so I can tell you I have sat in front of countless numbers of people who have made mistakes when purchasing and owning annuities. And I have visited people who wish they... Read More

Caveat Emptor: You May Owe Taxes Despite 401(K) Losses!

One among many ways you lose money in non-indexed mutual funds is the tax trap. You may have to pay taxes even when your mutual fund loses money! To many people this is... Read More

Bearish or Bullish?

If you are interested in stock investing and the stock market, you may have plenty of questions. Even if you have already started investing, you may still have many questions about the details... Read More

Using Divergences to Keep Out of Bad Trades

The American Football season just came to an end with my team getting close to the championship but falling short again. I am a big fan of the Indianapolis Colts and we keep... Read More

It?s Not the Size of Your Bank Account

You might think that if you win the lottery or get a huge raise, all your problems will be solved. Sounds logical, right? Well, it might sound logical, but it isn't. Having a... Read More

Before You Start Investing

There maybe several reasons why you to want to invest your money. You may want to retire early, want to build your own business in the future, or to pay for your kid's... Read More

Annuity Investment - The Whole Truth

Do you ever feel like you haven't been told the whole truth? Kind of like something is missing? Well, you are not alone.With many investors awestruck over the last several years by the... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll often feel the need to trade.You may be bored or frustrated. Or you just want to try a certain type of trade.STOP!Realize that... Read More

CYA

You all know what CYA stands for. Of course, Cover Your Assets.And everyone does it. You have protection against losing your car in an accident. You have protection against being sued from that... Read More

Realistic Investing Expectations

Over the long term stocks have provided us with great average return results. But this average return masks a great deal of volatility, because returns have fluctuated within a very wide band.This extreme... Read More