4 Appalling Mistakes to Avoid When You Invest in Stocks

In a bull market, stocks can seem like a siren song. Admit it – you’re tempted to throw money at the market after Tuesday’s and Wednesday’s market performance, aren’t you?
Especially since the Dow Jones Industrial Average (DJIA) and the S&P 500 took an appreciable breather from a 109-day winning streak, initiated Tuesday by a disappointing downturn in financial and industrial stocks.
In fact, the stock market turned in its worst performance year-to-date these last few days. Wednesday, The Dow Jones industrial Average dropped 238 points, its biggest one-day percentage loss since September 13. The Standard & Poor’s 500 slid 29.35 points.
Need you worry? After all, don’t the gurus preach that a true correction occurs only when the market dips a whopping 20%? That kind of market is nowhere in sight … yet. What currently is pummeling the market is a political issue – the uncertainty associated with the Republicans to muster enough votes for a Healthcare Package to replace Obamacare.
If you’re like many investors, you’re pleased that the market took a very short trip south, but didn’t tank altogether. This particular market setback will give you a chance to pick up some bargains.
Or so you hope.
But while buying on a slight dip honors the conventional wisdom for entering the market at a good price, now is a time for you to be especially careful.
Here are 4 appalling investing mistakes that could decimate your stock portfolio.
Chasing a “hot” stock. Sure, you’d love to pick up shares of the next Apple or Facebook. Wouldn’t all of us? But chasing glamour stocks has never made for a decent investment strategy, observed Yale University finance professor Roger Ibbotson back in 2014. According to Ibbotson, “there’s too much interest in them.”
A study by Ibbotson and Thomas Idzorek, president of Morningstar Investment Management, showed that information with minimal impact on future returns often leads whimsical investors to drive up prices. Unlike Warren Buffett, for instance, who famously chooses stocks for their intrinsic value and holds for the long term, hot-stock investors look for circumstances and numbers that offer dizzying short-term results and lead to investor over-confidence.
When you feel tempted to try for an explosive short-term hit, give some thought to Enron, the company Fortune Magazine named “America’s Most Innovative Company” for six consecutive years, before it was revealed the organization was tacked together on fraudulent schemes.
Or think about Blockbuster CEO John Antioco who myopically declined a partnership offer from Netflix in 2010, and found himself filing for bankruptcy shortly thereafter.
In short, remember that your overreliance on “hot stocks” could eventually wipe out the retirement savings you worked years to accumulate.
Failure to consider a company’s earnings per share (EPS). A company’s earnings per share is simply its net profit allocated to each outstanding share of company stock. It’s an excellent way to track the growth of a company, or to detect one of its weaknesses over several years. It’s a constant you can depend on when you evaluate companies in your portfolio. Turn a blind eye to it at your own risk.
Failure to monitor your portfolio and diversify.Companies change. Economic conditions change. What seemed like an excellent investment one year might not seem so the next year. It’s important for you to stay on top of your investments and to diversify your holdings.
Failure to hedge your stock portfolio with hard assets. Keep in mind that, ultimately, a stock certificate is a piece of paper. A company’s value can alter through a management shuffle, a strike, unforeseen competition, or regulatory changes. It’s important to fortify your portfolio with hard assets.
The best of the hard assets is physical gold. The shiny metal has intrinsic value. It’s negatively correlated to the U.S. Dollar, and therefore, to the stocks you hold in your portfolio. In other words, if the stock market begins to falter, and your stocks begin to slide, if you have physical gold in your portfolio, your chances of balancing any loss in these stocks remain good to excellent.
Request more information now or call 800-777-6177 now, and ask to speak to a Fortress Gold Group representative.

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