Money Management: Top 7 Investment Mistakes for a Nationally Known Stock Market Strategist
By Jordan Kimmel
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Jordan Kimmel is a private money manager and a frequent guest on many of the top financial shows including CNBC, Fox News and ABC News. He offers the following advice to stock market investors. The market is not to be feared, but understood.” Kimmel says.
- 1. map”. A pre-planned asset allocation generates positive results and eliminates emotional panic selling.
- Buying cheap stocks a/k/a “Road crews erect "Dead End" signs for a reason”. Most stocks with low share prices also arrive at the bottom for a reason. There must be institutional interest to influence price, and many won't even glance at stocks below $8 or $10.
- Purchasing story stocks a/k/a “A good fable lulls a child to sleep”. Don't get taken by compelling “story” stocks. The plots include a cure for cancer, a big oil strike or a revolutionary invention. Such promising stories rarely prove true. If the “story” materializes, the company will still be a buy.
- Selling your winners a/k/a “You gotta know when to hold ‘em’”. Don't sell your winners. These companies combine outstanding management, product and cash flow, creating steady growth for years. Holding these companies for the long run will compensate for other investing mistakes. In fact, one or two big winners can create real wealth.
- Holding onto a peaked stock a/k/a “Trees don't reach to the heavens, and companies don't continue growth beyond reason”. Top companies peak for reasons such as attrition of top management or competition. Systematic pruning will help you avoid a rotting, unhealthy investment.
- Under/over diversification a/k/a “Ideas are good, but a mind full of them is better”. Resist the urge to rely on a few stocks that you know. Lack of portfolio diversification leads to erratic and volatile returns, and owning several companies in the same industry also isn't diversification. The best investment results happen by investing in leading companies across various industries.
Over diversification a/k/a “A portfolio stretched like an old T-shirt won't help an investor benefit from their insight”. You don't create diversification by spreading yourself too thin. Although a mind full of ideas is good, ideas acted upon on a whim waste good thoughts.
- Over trading a/k/a “Replanting a garden every week won't produce high-quality tomatoes”. Don't follow market “noise” and bounce from sector to sector or theme to theme. This prevents investors from enjoying the rewards of a long-term winner. Give stocks enough time to mature and compound.
Mr. Kimmel is a managing member of the Magnet Investment Group in Randolph, NJ and developed the MAGNET® stock selection strategy. He is also the author of Magnet Investing, build a portfolio and pick winning stocks using your home computer. His methodology was the subject of a Forbes Magazine article (June, 2004). If you're a member of the press, hes available daily for interviews. Public appearances or group talks can also be scheduled. He can be reached through his web site at http://www.magnetinvesting.com
Copyright © 2004 Jordan L. Kimmel
Article Submitted On: November 16, 2004