{"id":62548,"date":"2012-02-15T16:48:32","date_gmt":"2012-02-15T11:18:32","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=62548"},"modified":"2012-02-15T16:48:32","modified_gmt":"2012-02-15T11:18:32","slug":"top-5-investing-mistakes","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2012\/02\/15\/top-5-investing-mistakes\/","title":{"rendered":"Top 5 Investing Mistakes"},"content":{"rendered":"
\"1903<\/a> <\/p>\n

Image via Wikipedia<\/a><\/p>\n<\/div>\n

I missed the rally in TATAMOTORS<\/a> today. When a stock that you don\u2019t own takes off (+11% since yesterday), you are filled with blinding rage. I made the #1 mistake of letting my individual preference interfere with my investment decision. I never liked Tata cars \u2013 I feel that they fall apart in a year and their interiors are sub-par. But turns out I missed the wood for the trees. So I sat down and wrote up a list of 5 mistakes that investors should avoid:<\/p>\n

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  1. Getting confused between the company\u2019s product and its stock<\/strong>. Very often, you may love the product the company makes. You may love <\/em>the XUV 500, but that\u2019s not a good reason in itself to own M&M<\/a>. You may hate Airtel\u2019s service, but that\u2019s not a good reason in itself not to own BHARTIARTL<\/a>.\n
  2. Getting caught up in a fad without thinking through the economics<\/strong>. The market goes through periods where everybody is talking up one <\/em>sector. I have seen infatuation with infrastructure stocks, real estate, FMCG<\/a>, oil & gas all come and go. The only thing that is guaranteed with infatuation is a nasty hangover. Don\u2019t only focus on the sector du jour. Focus on revenue growth, profitability and valuation of companies across sectors.\n
  3. Hanging on to your losers<\/strong>. We all make mistakes. But hoping for a miracle that will somehow turn a position that is down 10% is stupidity. You should have a stop-loss, or better yet, a trailing stop. Let the losers go.\n
  4. Letting go of your winners<\/strong>. This is the corollary to #3. Why sell a stock that\u2019s on a hot streak. Own it till the rally exhausts itself. If you have a trailing stop setup, the exit automatically takes care of itself.\n
  5. Getting confused between trading and investing<\/strong>. My sincerest advice is to leave intra-day trading to computers. High Frequency Trading<\/a> (HFT) has pretty much taken over most exchanges in the world, driving down holding periods to seconds (on an average, the holding period of a stock in the US is around 22 seconds<\/em>.) You cannot compete with the machines. Your \u201cshort term\u201d should at least be a month<\/strong>. This allows you to do your homework and focus on the total return of your portfolio.<\/li>\n<\/ol>\n

    And for those who owned TATAMOTORS before the results, good job!<\/p>\n

    Questions? Email me: <\/em>abhi@stockviz.biz<\/em><\/a><\/p>\n

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