Common Mistakes on Blue Chip Stocks Investment and How to Make it Better
1.Mistake: Most investors do not know what to look for and consequently start off with undefined goals and bad investment selection criteria, which lead to poor stock selection.
Remedy: Decide what your goals are. Create an investment plan, and use the techniques in Chapter 6 to choose your winning blur chop stocks.
2. Mistake: Many investors believe they can average sown the price of the stocks they own by buying more shares as the prices drops, which is technically true. However, why is the stock price moving down and will it change course through time and for what reason?
Remedy: Remember, you only make money when the stock price goes up.
3. Mistake: People tend to buy stocks selling at low prices per share. The think it’s better to buy more shares of a lower-priced stock fewer of a higher-priced stock
Remedy: The price is irrelevant. You must focus on investment dollars, not numbers of shares. Remember, stocks are like anything else; the higher the quality, the higher the price. That’s not to say that a stock is of dubious quality simply because it sells for $5 to $10. However, the commission percentages are higher with respect to total dollars invested for lower priced stocks: Institutions do not buy them, they tend to be more volatile, and they therefore represent higher risk to your portfolio.
4. Mistake: Inexperienced investors want to make a killing. They’re looking for the easy way to make a quick buck and get rich. Not making a plan, not thoroughly researching your investment choices, and not following through with your decisions, all of which are time consuming, will lead to disaster.
Remedy: Remember, only through a disciplined approach and patient investing will you increase your odds of being successful financially.
5. Mistake: Investors love tips. Never buy on a tip or story or rumor. Often, tips are wrong; when tips are in error, the price of stock usually reacts negatively.
Remedy: There is no substitute for sound investment practices. Eliminate market hype, emotion, and gut feelings—just stick to sound fundamentals.
6. Mistake: Most investors hold onto their losses and sell their profits.
Remedy: This is exactly the opposite of what and astute investor should do. Let your profits run, sell losses and always upgrade your portfolio.
7. Mistake: Most investors hesitate to buy stocks that are at or near their highs. To most investors, the price is simply too high. Your instincts may well lead you to the wrong conclusions; the market will not.
Remedy: There is a reason why stocks are at their highs. Buy them and watch them go even higher.
8. Mistake: Investors often focus too heavily on taxes and commissions.
Remedy: Your focus should be on making profits. When your focus is on taxes and commission, you make inappropriate decisions based on tax sheltering, saving brokerage fees, or trying to qualify for long-term capital gains. Paying commissions is relatively minor when compared to making the correct investment decisions and taking the correct actions as markets dictate. The greatest advantages of owning common stocks is the relatively low commission costs, instant marketability, and liquidity versus real estate, commission costs, instant marketability, and liquidity versus real estate, where commissions are higher, liquidity is lower, and marketability is questionable.
9. Mistake: Investors tend to be influenced by things that are not particularly important over the long haul, such as stock splits, dividend changes, news announcements, and brokerage firm recommendations.
Remedy: Stick with your plan and stay focused. To be successful, you must keep the distractions at bay.