Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Three Critical Mistakes Investors Make

InvestorEducation / Learning to Invest Apr 02, 2013 - 01:27 PM GMT

By: DailyGainsLetter

InvestorEducation

Moe Zulfiqar writes: When it comes to investing for the long run, investors must make sure that they make their investment decisions based on extensive analysis—not buy on rumors or “inside information.” Through thorough analysis, an investor can gain peace of mind.

If you avoid these following common investor mistakes when investing, you can be a better investor over the long run and can witness your portfolio grow.


Critical Mistake #1: Basing investment decisions on a company’s price-to-earning (P/E) ratio

The P/E ratio is very commonly quoted in the financial media, but at the end of the day, by itself, this ratio doesn’t really tell you much about a company’s health. In essence, the P/E ratio is simply derived by dividing the company’s price per share by its earnings per share—it’s nothing more than that.

Let me ask one question. Currently, Apple Inc (NASDAQ/AAPL) trades just above $450.00 with a forward P/E of 9.09. (Source: Yahoo! Finance, last accessed March 27, 2013.) How does the company’s financial health look?

In order to make a better investment decision, you must look at other measures as well. By doing this, you can know how the company is doing and how efficient it really is in its business.

Critical Mistake #2: Taking high risk to make higher returns

It is true that the more risk an investor takes, the higher their returns are going to be. But investors who are investing for the long run must realize that this can kill their portfolio in a very short period of time.

By using proper risk management and capital preservation techniques, you can grow your portfolio exponentially over time. Just look at some of the biggest companies featured on key stock indices today; at some point, those same companies were trading at low prices even though they’re significantly higher now. Consider Bank of America Corporation (NYSE/BAC), for example. In the midst of the financial crisis, the shares of this company traded below $2.50. Now, the company’s shares trade above $12.00—an increase of more than 380% in a matter of a few years.

Bank of America is just one example; there are many other opportunities where investors can make healthy returns. You don’t have to take high risk—you just need time to grow your portfolio to new heights.

Critical Mistake #3: Buying low and selling high

In theory, the buy low/sell high strategy sounds great, but the question that arises from this is: what is “low?” And what is “high?” If a stock is trading at $100.00 and it falls to $95.00, is it low? And for a stock trading a $50.00 and rising to $60.00, is it considered high?

Investors might make the mistake of considering a stock low when it’s still falling or consider it high when the price is increasing. Instead of buying when a certain stock is falling or selling when it is appreciating, you should assess the fair value of that stock. Remember, the stock market moves on expectation, and certain stocks move on how well they are going to perform.

Considering these three critical mistakes when you make any investment decision will make you more aware of your performance, keeping you from buying into the hype. In addition, your decision will be based on actual research, and not just make-believe “information.”

Source: http://www.dailygainsletter.com/investment-strategy/top-three-critical-mistakes-investors-make/550/

Copyright © 2013 Daily Gains Letter – All Rights Reserved

Bio: The Daily Gains Letter provides independent and unbiased research. Our goal at the Daily Gains Letter is to provide our readership with personal wealth guidance, money management and investment strategies to help our readers make more money from their investments.

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules