I've been investing since 13 thanks to my mom. It has taken 25 years and countless mistakes to hammer some very basic things (actually common sense) into my thick skull:
1) If it's too good to be true, it is. Case in point: DRYS and NT (NTRLQ.PK now). DON'T MESS WITH P.O.S companies. You have 10,000 better ones to choose from. REAL companies.
2) Never buy into a rally. I don't know how many times I've been burned this way. Be patient and wait for the right time. Buy low, sell high. Not the other way around.
3) Valuation is everything. I was one of the dot.com bust casualties. Lost everything. It has taken 8 years to recover. Yeap, I was out of the market for 8 years repaying debt and missed the biggest bull market of all time. All because I ignored "P/E ratio"
4) Diversify! You have to diversify your portfolio between different sectors. Yeah you can make a killing by betting the farm on one horse, but chances are more often that that horse is going to kill your first.
5) Study the company, industry, and financial statements as if your final exam. I can't stress this enough. Reading blogs and newsgroup postings is fine, but you have to do your own due diligence first. Facts don't lie (well, sometimes I wonder...) Other people's opinions are just that -- opinions.
6) Greed will kill you. This is so difficult for investors. For your short term holdings, if you've met your goals, take the profit and run.
7) Take a loss when you have to. Capital preservation is the key. If you've made a bad buy, you need an exit. Don't let emotion get in the way. It is only money and you can make back the loss. But if you lose all your principle, game over.
8) Last but not least: Your family comes first. You must alway think what would happen if you lost it all. Where will your family live? How are you going to feed the kids? With that in mind, you will realize that (1) you can only invest what you can afford to lose; (2) you can't do crazy things like use credit card cash advances or margin the account to the max; (3) you cannot make risky investment decisions for the hope of a jackpot. Fine, if you're on your own and you lose everything, well it's only you. But if you have a family depending on you, you just can't do that sort of thing because the odds are against you.
Good luck to all and God bless.
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