Common mistakes in stock market

1.

Buying low-priced stocks

People are drawn to bargains like moths to a flame.. But when it comes to investing, all too often you get what you pay for.

2. Using fundamental analysis only

Looking at charts of past market leaders shows you what to look for today when trolling for a new crop of winners.

3. Buy and hold

Holding leading stocks is often easier when the market's heading up, but in a bear market holding losers will wipe you out.

4. Averaging down

Some financial gurus would have you believe that averaging down is the silver lining in a declining stock. The average cost for your holding, therefore, goes down. But that strategy rests on two big assumptions.

5. Not having an exit strategy

Knowing when to sell your stock is as much a skill as knowing when and which ones to buy. A key investing rule is to cut your losses quickly.

6. Focusing on low P-E stocks

A common mistake among growth investors is to ignore stocks with unusually high price-to-earnings ratios. Truth is, many of the best stocks tend to command a premium because of their outstanding growth.

7. Buying stocks in a down market

A falling market makes owning stocks a risky proposition. Three out of every four stocks follow the broad market's trend.

8. Focusing on dividend-paying stocks

Dividend-paying stocks can sometimes provide a steady income stream for risk-averse Investors. But dividend yielding stocks sometimes go down. For growth investors, they may also produce smaller potential gains.

9. Falling in love with a stock

One prominent school of investing favors an impersonal approach to stock picking. Let the numbers dictate what you buy and sell, goes the theory. Do not fall in love with your stocks and don't let fear and greed enter into your decision making.

10. Paying too much attention to insider selling

For decades, people have spent endless time and energy searching for an easy way to time the market. Oscillators, sentiment indicators, and insider selling gauges have all been treated as reliable primary signals to buy and sell at the right time.

Original Author: Kaushik Hira

Original Link: http://www.facebook.com/home.php?sk=group_147436708639146&view=doc&id=153759344673549