The Tech Stock Investor

There is a great post at GetRichSlowly.org by guest writer Pinyo, author of Moolanomy, about the mistakes made as an investor learning the ropes. I think the article references some mistakes that are made by people even after they have “learned the ropes.” I personally have succumbed to two of these mistakes noted:

8. Ignoring diversification — Again, with little experience and little money to invest, I was going after high-flying stocks (at least I thought they were) and did not pay any attention to diversification. Like asset allocation, it took me a long time to realize how diversification helps to reduce risk and enhance performance. The value of diversification became apparent to me at about the same time that asset allocation did.
9. Selling winners and keeping losers — This was my all time weakness. I knew the concept of “buy low and sell high.” So with little experience, I ended up selling a lot of my winners like Staples (SPLS), Ameritrade (AMTD), and Microsoft (MSFT) to lock in the gain; but held on to my losers like Flemings (FLMIQ) and eToys (ETYS).

I don’t know how many times I have let my portfolio allocations slip with more money in one sector than it should be holding while that sector was sliding and dragging my performance with it. This is just pure laziness on my part and my lack of checking the allocations on a regular basis.

Number 9 on the list is also one I still get caught up in now and again. Pruning trees and shrubs encourages growth and pruning your portfolio will do the same to it. Getting rid of dead weight gives you more money to spread around in your winners or to add new potential winners to your mix. When we become enamored of a stock we sometimes fall prey to the old “love is blind” cliche since we can clearly see that darling stock slipping, but we just cannot let it go. There must be a medical term for this, oh wait, there is. It’s called insanity: doing the same thing over and over all the while expecting different results each time we try. :) Stop the madness. Prune those portfolios.

What mistakes do you make in your investing life?