The stock market is a place where history keeps repeating itself. In every bull cycle, hordes of new investors enter the market without a clue about how the market works. They make some money in one or two unknown stocks. Profits are booked quickly and immediately redeployed in the next 'sure thing'.
Once the bear cycle starts and stock prices fall, they buy more to reduce their 'average' cost till the stock collapses in a heap. 'Short-term' players become 'long term' investors in the hope of getting back their invested amounts. Eventually, they sell out at a big loss.
When the next bull cycle starts, a new set of investors enter the market and repeat the mistakes of their predecessors. And so it goes on. Is there a way out of this cycle of mistakes and losses?
In an article in investopedia.com, William Artzberger discusses about 8 common investing mistakes:
- Investing in something you don't understand
- Falling in love with a company
- Lack of patience
- Too much investment turnover
- Market timing
- Waiting to get even
- Failing to diversify
- Letting your emotions rule the process
- Develop a plan of action
- Put your plan on automatic
- Have some 'fun' money