The American Association of Individual Investors is a non profit organization who's purpose is to arm investors with the tools and knowledge to manage their finances effectively and profitably. Common Stock Investment Mistakes Don t invest in a stock that has been spotlighted in the news recently. Many individuals are attracted to stocks that have received substantial media coverage. Often, however, being a media star drives up the stock price significantly. At this point you are buying a stock with a price that already embodies great expectations, with all the possible and some improbable good news already incorporated into the stock price.
Some investors go to great lengths to avoid recognizing a loss that has already occurred.
This may help your ego, but it won t help your performance. Instead, always evaluate your current holdings relative to other potential investments, and view realized losses as an opportunity to protect investment gains from taxes. Don t let your natural disdain for paying taxes overcome your evaluation of the merits of continuing to hold a stock. Some investors hold on to stocks with mediocre prospects because they do not want to sell and incur taxes on any gains. All too often, these are stocks that have already soared in value.