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Here Is A List Of What Jim Cramer Of CNBC's Mad Money Calls The 5 Worst Investment Mistakes

Apr 30, 2008
Many investors just jump right in and then they make mistake after mistake costing them a ton of money. If you know what these mistakes are and you avoid them you will be way ahead of the game. This is why I decided to post Jim Cramer's list of the 5 worst investment mistakes.

1. Buy and Hold isn't a Strategy

The single worst and widespread mistake out there is Buy and Hold. Buy and hold is a thing of the past. Buy and hold isn't a strategy, it gives you a false sense of security. When you buy and hold you think "my work here is done", it's an excuse to be lazy. It needs to be "Buy and Homework". Listen in on conference calls. Check for Management confidence. You should be spending at least an hour a week studying, per stock.

2. Shoulda, Woulda, Coulda

If only I bought this or that. Don't dwell on missed opportunities or bad mistakes. When you can't get over your mistakes it becomes counter productive. Being an Investor is emotionally brutal. You have to be tough minded. Focus your time on making good decisions in the present. Learn from your past then move on. It is our nature to regret mistakes, but overdoing it won't get you anywhere. Don't let it throw you off your game. This is what really separates the good investors from the bad

3. Tips are for waiters. Not for Traders

You can get great stock tips. These are the ones from insiders who actually know company's future moves. These types of tips are illegal. The other types of tips are usually from someone who has an agenda. If someone wants to give you a stock tip it should send up a red flag. That being said there is a difference between a "stock tip" and a company that does the homework for you and gives you recommendations.

4. Lack of Diversification

Diversify. Diversify. Diversify. Don't keep your entire portfolio in one sector. You should not have more than 20%, even in a very hot sector. Remember the tech bubble. Enough said.

5. Buying your whole position at once

Sometimes you are your own worst enemy. In these times you need rules to suppress your instincts. Arrogance is a sin that will cost you a lot of money. Buying your whole position in a stock at one time is the most arrogant thing one can do. When you buy your whole position at once you are saying "this stock is not going any lower from this point on." That is arrogance. Build a position over time, not all at once. Patiently wait for good entry points. It's hard to time stock perfectly...Yet another reason to buy slowly.

Summary

Investing in the market takes a lot of time and discipline. Following these rules will save you a bunch of money. If you are unable to put in the time (1 hour per week per stock) you should find a good program or system to assist you.
Good Luck and Good Investing!
About the Author
I'm Dan Cunningham. I am an investor and entrepreneur. Feel free to contact me with any questions or leave a comment. dan@rabbitsreport.com Rabbit's Report on Internet Wealth
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