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The 10 dumbest things investors say to advisors.
1} When my investment gets back up to what I paid, get me out.
This is surely a big mistake. That stock has absolutely no idea that you are waiting for it to go up so that you can sell.
2}The stock is selling at $3.00 a share. How much can I lose?
$3 multiplied by the number of shares.
Oh yeah, do not forget to add in commission.
3} I want to buy shares of XYZ Company. Three years ago, they were selling at $60; now the stock selling at $5.
You can actually make a lot of money investing in good companies when their stocks are out of favor (go to dictionary, look up: 'Warren Buffett'). You cannot make money buying junk just because it is cheap.
(Same dictionary, lookup 'cheap junk').
If this creates confusion -- please see item 2.
4} The stock is up 10 % this past month.
It is too high, I can not buy it now.
Have you ever heard of a long-term uptrend? Just because you missed the bottom does not mean you missed the boat.
I have heard that the shortest time measurable by man is the time between when it was too soon to buy a stock and when it was too late.
5} I paid $60 for that stock 3 years ago. Today it is selling at $4.
I can not afford to sell. I do not want to lose so much.
I am just guessing here, but did you say the same thing at $30? $20?
6} I bought the stock at $10 and now it is $35. I have too much profit.
I can not it sell here. I do not want to pay so much in taxes.
My wish for everybody is that next year you have more than twice the profits and that you have to pay twice as much in taxes.
7} I never sell an investment at a loss. I am a long-term investor. Eventually, they always come back.
Ever heard of ENRON? Pan American Airlines? Polaroid?
Penn Central Railroad?
If I were to be your advisor for the next 20 years, I GUARANTEE you that you will have losses. Losses are a very important part of a successful investment program. Since the perfect human hasnt been created yet, the perfect advisor has not been created yet. Expect to have some losses and plan accordingly.
8} Sell my utilities; buy DOTCOMS.
Stock brokers heard this, a lot, just a few short years ago. Every up cycle investment advisors are instructed to sell safe, but dull investments and buy something with sex appeal that is moving. The worst possible thing has happened -- one of the clients' friends or acquaintances is making more money than they are.
It is the CINDERELLA story. They look great for a short time. Then, the clock strikes 'OVER' and their limo turns back into a pumpkin.
9} I know as much about the stock market as any broker.
What would you think of me if I came to your place of business and told you that I know as much about your business as you do?
Can you outperform a professional in the short run? Absolutely.
You would never say this to your doctor, lawyer or accountant.
You wouldnt even say that to your butcher or your barber. Stock market investing is the only profession where the amateurs think they know as much as the professionals because they might have picked a winner at one time.
10} That total stranger made the investment sound like such a great idea.
Of course he did. That is his job.
Do you remember your mother telling you 'Do not talk to strangers'?
When was the last time you ran with scissors?
If you develop the practice of giving your money to strangers, sooner or later, you will come to harm. Or, as Al Capone used to say 'Anybody found sleeping in the trunk of a car, deserves to be shot.'
1} When my investment gets back up to what I paid, get me out.
This is surely a big mistake. That stock has absolutely no idea that you are waiting for it to go up so that you can sell.
2}The stock is selling at $3.00 a share. How much can I lose?
$3 multiplied by the number of shares.
Oh yeah, do not forget to add in commission.
3} I want to buy shares of XYZ Company. Three years ago, they were selling at $60; now the stock selling at $5.
You can actually make a lot of money investing in good companies when their stocks are out of favor (go to dictionary, look up: 'Warren Buffett'). You cannot make money buying junk just because it is cheap.
(Same dictionary, lookup 'cheap junk').
If this creates confusion -- please see item 2.
4} The stock is up 10 % this past month.
It is too high, I can not buy it now.
Have you ever heard of a long-term uptrend? Just because you missed the bottom does not mean you missed the boat.
I have heard that the shortest time measurable by man is the time between when it was too soon to buy a stock and when it was too late.
5} I paid $60 for that stock 3 years ago. Today it is selling at $4.
I can not afford to sell. I do not want to lose so much.
I am just guessing here, but did you say the same thing at $30? $20?
6} I bought the stock at $10 and now it is $35. I have too much profit.
I can not it sell here. I do not want to pay so much in taxes.
My wish for everybody is that next year you have more than twice the profits and that you have to pay twice as much in taxes.
7} I never sell an investment at a loss. I am a long-term investor. Eventually, they always come back.
Ever heard of ENRON? Pan American Airlines? Polaroid?
Penn Central Railroad?
If I were to be your advisor for the next 20 years, I GUARANTEE you that you will have losses. Losses are a very important part of a successful investment program. Since the perfect human hasnt been created yet, the perfect advisor has not been created yet. Expect to have some losses and plan accordingly.
8} Sell my utilities; buy DOTCOMS.
Stock brokers heard this, a lot, just a few short years ago. Every up cycle investment advisors are instructed to sell safe, but dull investments and buy something with sex appeal that is moving. The worst possible thing has happened -- one of the clients' friends or acquaintances is making more money than they are.
It is the CINDERELLA story. They look great for a short time. Then, the clock strikes 'OVER' and their limo turns back into a pumpkin.
9} I know as much about the stock market as any broker.
What would you think of me if I came to your place of business and told you that I know as much about your business as you do?
Can you outperform a professional in the short run? Absolutely.
You would never say this to your doctor, lawyer or accountant.
You wouldnt even say that to your butcher or your barber. Stock market investing is the only profession where the amateurs think they know as much as the professionals because they might have picked a winner at one time.
10} That total stranger made the investment sound like such a great idea.
Of course he did. That is his job.
Do you remember your mother telling you 'Do not talk to strangers'?
When was the last time you ran with scissors?
If you develop the practice of giving your money to strangers, sooner or later, you will come to harm. Or, as Al Capone used to say 'Anybody found sleeping in the trunk of a car, deserves to be shot.'