Five Investing Mistakes You Should Avoid
By TSC Breakout Stocks Team
Mistake 1: Failing to cut losers. The first mistake we encounter is investors who hold on to losing stocks because they are “already down, so downside is limited,” or they have “held it so long, what''s the point in selling?”
Mistake 2: Not doing homework. We believe it is vital for long-term investors to have a disciplined stock selection process. One of the worst things an investor can do is buy a stock solely on the basis of superficial reasoning, such as the release of a certain product or the hiring of a prominent executive.
Mistake 3: Being afraid to change directions. Investors should not fear change. In fact, change can save you tons of money and make investing much more enjoyable.
You are investing in the stock market, which is a mechanism that allows for price changes and sentiment shifts on a daily, if not hourly basis. We aren''t recommending you become a daytrader or market-timer, but we do believe at least being aware of the constant change in the market or economy will make you a better, more profitable investor.
Mistake 4: Buying on tips and rumors. Buying a stock on the basis of a tip or rumor is one of the biggest mistakes an investor can make. There is no way to know if the information is true or even remotely related to truth. Very often, people have a vested interest in spreading rumors due to their own position in a particular stock. The most common type of rumor is generally related to a merger or acquisition, which generally provides an instant windfall to shareholders of the companies being bought. However, these events are among the most difficult to predict, and rumors on potential deals should never be trusted.
Mistake 5: Owning too many large-caps. If you follow the advice of most Wall Street firms and strategists, you likely own too many large cap stocks in hopes of outperforming the market. Over the last five years, small- and mid-cap stocks have outperformed large caps by some 70 percentage points, and 80% of the top 100 performing stocks in 2005 were of the small- and mid-cap genre.
Get Shorty\r\nForbes.com\r\nBernard Condon, 03.13.06\r\n\r\nThe American consumer may indeed collapse, taking the economy with him. Just don’t bet on it.\r\n\r\nShort-sellers have long had Tractor Supply co. in their crosshairs, convinced shares of the farm supplies retailer would fall hard when consumer spending slowed. But last month the $2 billion (sales) chain served up a surprise: Same-store sales in the fourth quarter rose 10%, double estimates. The stock jumped 20% in an hour.\r\n\r\nAmerican consumers have embarrassed bearish economists who predicted that higher interest rates, spiking energy prices and slower home sales would produce a sharp slowdown in spending. Witness January’s report of a 2.3% gain in retail sales over a month earlier. Short-sellers have suffered more than embarrassment. Lately they’ve been buying back retailers’ shares at higher prices than they shorted them at.\r\n\r\n“The pastime of America is shopping,” declares Ivan Feinseth of research boutique Matrix. “The consumer will never be spent.”\r\n\r\nOne stock Feinseth likes is Deckers Outdoor, maker of the faddish Ugg boots. As of October shorts had borrowed shares equivalent to 19% of Deckers’ daily trading volume. The shoe and apparel maker is vulnerable, they declared, because 40% of its sales come from Uggs. But the boots have continued to sell briskly and even received praise from Oprah recently on tv. Short-sellers scrambled to repurchase shares in a classic short squeeze–in which lenders demanded shares be returned–and that sent the stock higher. The short interest ratio has dropped in half, according to Bloomberg. The stock has risen 17% in the new year.\r\n\r\nOther painful surprises: beleaguered bookseller Borders, auctioneer Escala and cbrl Group, which runs Cracker Barrel restaurants. All berated by bears for troubling numbers or bad management or both–and all up 30% or more from their lows this fall.\r\n\r\n“The world has been turned upside down,” laments a veteran investor at a $400 million hedge fund. “The Julian Robertson technique–go long the good and short the bad–doesn’t work anymore.”\r\n\r\nIt’s not only consumers who have ganged up on shorts. Those who survive a squeeze often end up hurt by buyout shops flush with money now and seemingly willing to buy any troubled company. Linens ’n Things had a short interest ratio as high as 9% before Apollo Management announced plans in November to buy it for $28 a share, a 6% premium. Maytag, Toys “R” Us, Fairmont Hotels & Resorts–all struggling, all short-selling targets and all taken private in the past year at premiums of 15% or more. The granddaddy of short defeats: Albertsons, a market-share loser to Wal-Mart. At their peak bearishness shorts had borrowed 20% of daily trading volume. Then in January a group including Cerberus Capital said it would buy the company for $26.29 a share, a 27% premium. \r\n\r\n“A surefire short,” says analyst Gary Vineberg. “It was big and it was ugly and it wasn’t executing well and it was unionized–and you couldn’t make any money shorting it. Everyone was whipsawed.”\r\n\r\nWhat happens next? Perhaps stock market laggards like Home Depot and Bed Bath & Beyond–big, stable retailers with good fundamentals–represent the true, bleak future of consumer-sensitive companies. Surely it can’t be stocks like Abercrombie & Fitch, the retailer of $180 ripped jeans whose shares have jumped 50% since September. “The jeans thing reminds me of the last days of Rome,” says one frustrated hedgie. “The consumer is near the end of his rope.”\r\n\r\nProbably so. But do you want to bet on it? \r\n\r\nhttp://www.forbes.com/forbes/2006/0313/040.html
Mistake 4: Buying on tips and rumors
…:-? Wah kebanyakan gue beli saham “base on rumor” terus “sell on news” tuh. Masih lebih oke daripada sistem LUKI (LU KIra-kira sendiri ) karena nggak mungkin ada asap bila tidak ada api. Jadi paling tidak kita mesti tau bau asapnya itu berasal dari ‘'api’' yg mana :peace:
The following article is dedicated exclusively to Mr. Spec…
Forbes.com, 02.14.06, 12:00 PM ET
NEW YORK - It''s one of the enduring mysteries of economics: Why do people refuse to act the way economists predict they should?
Why do they drive three miles to save a penny per gallon on gas? Why do they sometimes refuse a bargain that gives them something instead of nothing at all? Why do they avoid low price-to-book-value stocks, even though the returns on them are higher than flashy technology stocks?
A growing body of research into monkey behavior is starting to provide some answers. If we assume monkeys and humans share the same basic mental programming–an assumption some economists refuse to accept–then looking at how monkeys cooperate with each other and consume scarce resources might show certain patterns that are common to all primates.
Researcher Keith Chen at the Yale School of Organization and Management grabbed headlines last summer when he released a study showing that capuchin monkeys could be trained to use shiny metal disks just like human money. Like their human cousins, the capuchins reacted to price changes by changing their consumption patterns. (He also may have captured on videotape the first known example of animals engaging in prostitution.)
“My underlying goal is to determine what aspects of our economic behavior are innate, deep in the brain and conserved over time,” says Chen, an economist who teamed up with Yale psychologist Laurie Santos to study capuchin behavior.
Chen was building on research from Emory University''s Yerkes National Primate Research Center, which has been working with capuchins for years because of their strong instincts for cooperation and working in groups (in the wild, they eat large squirrels, which require at least two monkeys to capture).
In groundbreaking experiments in the late 1990s, Emory professor Frans de Waal showed that capuchins will refuse to “work” if they feel they are getting an unequal share of the rewards. To test the premise, researchers designed a tray that was too heavy for a single monkey to pull into the cage. The tray contained food that was available only to one monkey–dubbed “the CEO”–who could decide how much food to push through a mesh separating him from the “worker.”
The researchers observed a pattern where the CEO kept about five times as much food as the worker. Any more, however, and the worker rebelled and refused to help, leaving both monkeys without reward.
In more recent experiments reported in Nature magazine in 2003, de Waal and Emory anthropologist Sarah Brosnan showed that monkeys will rebel if they see another monkey getting a reward that they perceive as more valuable. First, they trained monkeys to trade pebbles for slices of cucumber.
“You can do it 25 times in a row, and they are perfectly happy getting cucumber slices,” de Waal says. But if you give a monkey more desirable grapes, “the one who gets cucumber gets agitated, throws pebbles out of the cage and eventually refuses to do any tasks.”
For de Waal, these experiments complement research showing that people are less concerned about absolute levels of wages or standards of living, compared with how they are doing relative to others. They also show the necessity of sharing rewards in a market economy–and the essential flaw in systems like communism, where people are expected to share resources without regard to how much work they do.
“If you cooperate, you have to watch what the other person is getting,” de Waal says. “You need to have some level of reciprocity.”
At Yale, Chen has been busy taking monkeys further down the path of human irrationality. Investors–and monkeys too, apparently–normally shun risk in favor of a sure thing. But studies of horse race gamblers and day traders have shown that when people are losing money, they tend to embrace risk instead of avoiding it.
Chen claims to have observed the same trait in monkeys. In a recent round of experiments, he gave the capuchins a choice between a researcher who shows them one slice and always gives two and a second who shows one and gives one or three. The monkeys preferred the first researcher, who delivered a sure “gain” of one.
But then he gave them a choice between a researcher who shows three and always gives two and a researcher who shows three and gives one or three. When facing a “loss” either way, the monkeys preferred the chance of getting three half of the time–even though the expected payoff in all cases was the same.
“Classical economics would suggest you just feel one way about risk,” Chen says. “What you see is the preference toward risk actually flips.”
Chen''s research, if proved by further experiments, could cast light on some of the biggest mysteries in finance. For example, investors seem to hate stocks that are priced relatively low compared with book value, even though those stocks consistently have had higher long-term returns than flashy, high price-to-book stocks. Economists have come up with many theories as to why this is so, including the idea that low-priced stocks tend to be in smokestack industries, where companies can simply fade away due to obsolescence. Rather than taking a chance on such a “sure loss,” investors prefer to gamble on high-flying tech stocks, even though they pay far too much for the chance of striking it rich.
Chen''s next round of experiments may introduce the monkeys to yet another irrational human habit: price inflation. Humans can''t seem to get used to the idea that it doesn''t matter what they pay for a good, as long as the price is the same relative to their income. They tend to modify their consumption patterns when prices change, even if their purchasing power doesn''t.
All these experiments leave some economists cold. Ariel Rubenstein, a professor at New York and Tel Aviv universities, criticized Chen''s research at the Econometric Society World Congress, held last August in London. He calls animal experiments, along with a rash of experiments using brain-imaging equipment on humans, “oversexy, overattractive.”
“There is a race in the profession to find these scientific connections to economic behavior,” Rubenstein says. “Not who will be the first to do good work, but who will be the first to get the outcome?”
It''s a monkey business after all…
jadi kesimpulan manusia spt monyet ?..irrational dan emosional..?
dulu g pernah post artikel ttg best trader itu psychopath ..dlm arti ga ada emosi ato empati.. ada yg psychopath disini?
g sendiri jg terkadang ga rasional ..contohnya blum lama ini beli kompi agak lebih mahal hanya krn suka salesnya..pdhal tau utk barang yg sama di lantai dibawah ada tacie yg bisa ngasih lebih murah .. tp g lebih milih beli di toko kecil itu krn yg punya toko paham ttg barang yg dijualnya ..ngobrol sampai berjam2 mungkin jg krn kesamaan background IT .. sdgkan tacie dibawah cuman bisa kasih harga ,ga ngerti brg yg dijual ..abis beli pulang baru nyesel beli kemahalan..pikir2 ga rasional sayang juga itu duit ..err cuman agak terhibur jg bisa kenalan sama adik penjual kompi itu yg jadi kasir mayan manis sih ..mahasiswi binus
karakter lain dr investor sukses .. adalah org2 yang membosankan .. boring guy..ini hasil riset prof. psikologi yg neliti para turtle traders .. g rasa bener jg kalo liat warren buffett contohnya hanya main saham yg dia pahami bisnis perusahaannya ..saham2 membosankan .. dan selalu berpegang pd prinsipnya itu ..utk ngetest apakah seorg yg membosankan bisa jawab pertanyaan ini (kata si prof.) ..misal makan di restoran buffet all you can eat .. disediakan sate ayam dan disampingnya sate bekicot… mana yg dimakan dulu?sate ayam yg sudah pasti rasanya ato cobain sate bekicot yg ga jelas ?kalo ambil sate ayam berarti termasuk org yg membosankan dan kalo ambil sate bekicot berarti tergolong org yang suka mencari excitement … sisanya simpulin sendiri..