Investment Sins That Will Wipe Out Your Capital

By: Michael Teo


To become a successful investor, you must always treat your stock investment like a business venture. A lot of the investors lost huge sums of their savings in the stock market simply because they are too stubborn to cut their losses.

There is a popular Chinese saying " If you leave a green mountain, you will not be afraid that there is not enough wood to burn." That is to say, "If you are able to protect your portfolio with the the right investment plan, you will have sufficient capital to take advantage of new investment opportunities." Unfortunately, most investors tend to sit on their losses and are eager to take a quick profit from their winners.

1) You should do your own research before investing. Research the company that you plan to invest by:

a) analysing the stock chart to determine that the stock is on a healthy uptrend
b) analysing its financial statements to determine its profitability
c) and talking to people (such as customers, suppliers or staff) who knows the company.

2) You should research and test your investment strategies before trading. Your investment plan should include:

a) a price target for profit taking.
b) and a cut loss price to liquidate a bad position.

3) Do not cancel or change your stop loss order when the market is trading near your cut loss level.
If you are wrong, cut your losses and get out of the position.

This will allow you to reassess the reasons for selling the stock objectively. When you find that you are liquidating your stock for the wrong reasons, you can always buy it back.

4) Do not buy stocks and leave them unattended.

You should keep track of your portfolio on a regular basis. Do not go on a holiday without placing a stop loss order or call level from your broker.

5) Do not over trade.

Know your risk appetite and trade with your spare cash. Over trading means that you may not be able to withstand a minor swings in the market and get out of a position prematurely.

6) Do not listen to market rumour.

When you start hearing market rumour about a stock it is usually a time to sell. Smart investors should look for big blocks of insider buying and selling.

7) Do not invest in a company which you do not understand.

When you are unsure, don't trade. Guessing will cost you money.




About the Author:

Michael Teo (MBA) is a professional trader and trainer. You can find out more about his investment courses at: http://www.asc-gp.com Email: michaelteo@asc-gp.com