Investing Tools for Investors Looking to Excel
10/21/02  

Avoiding the mistakes that punish investor's returns, leaving them with a portfolio of unwanted junk. 

Typical Mistakes Made By Investors

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Failure to diversify. No position should exceed 10% of your portfolio. In the world of small caps, high expectation, and/or inexperienced management, positions should not exceed 5% due to the capacity to disappoint.

Failure to cut losses quickly with a mental or actual Good Until Cancelled (GUC) Protective Sell  Stop on long positions and GUC protective Buy Stops on short positions.

Failure to sell when the reason to buy is in the price. Failure to set price targets.

Falling in love with a stock or a strategy, and ignoring changing circumstances.

Failure to understand opportunity costs and "dead money".

Failure to prune the weeds in your stock garden.

Failing to remember that 50% down, requires the stock to rise by 100% for you to get even. Set stop losses to prevent this situation.

Raising cash by selling winners, leaving portfolio of "losers".

Allowing emotions, rather than discipline, to dictate trading activity.

Selling low in panic, buying high in overbought, over-hyped, overextended stocks.

Buying short term bounces right into major overhead resistance.

Shorting short term declines into major support.

Buying at the open without limits on big Brokerage house buy recommendations and watching the stock disintegrate during the day.

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