Download 1 The temptation to sell is always when the market drops the furthest.

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Who needs a py ramid scheme or a crooked money manager when y ou can
lose money in the stock market all by y ourself. If y ou want to help curb
y our loss potential, avoid these 1 0 strategies.
1.
Go with the herd. If everyone else is buying it, it must be good, right?
Wrong. Inv estors tend to do what everyone else is doing and are overly
optimistic when the market goes up and ov erly pessimistic when the
market goes down. For instance, in 2008, the largest monthly outflow
of U.S. domestic equity funds occurred after the market had fallen over
25% from its peak. And in 2011, the only time net inflows were recorded
was before the market slid over 10%.
2. Put all of y our bets on one high -flying stock. If only y ou had
inv ested all y our money in Apple 1 0 y ears ago, you'd be a millionaire
today. Perhaps, but what if, instead, y ou had inv ested in Enron,
Conseco, CIT, WorldCom, Washington Mutual, or Lehman Brothers?
All were high fly ers at one point, yet all hav e since filed for bankruptcy,
making them perfect candidates for the downwardly mobile investor.
3. Buy when the m arket is up. If the market is on a tear, how can you
lose? Just ask the hordes of inv estors who flocked to stocks in 1 999 and
early 2000—and then lost their shirts in the ensuing bear market.
4. Sell when the market is down. The temptation to sell is always
highest when the market drops the furthest. And it's what many
inex perienced inv estors tend to do, locking in losses and precluding
future recoveries.
5. Stay on the sidelines until m arkets calm down. Since markets
almost never "calm down," this is the perfect rationale to never get in.
In today's world, that means settling for a miniscule return that may not
ev en keep pace with inflation.
6. Buy on tips from friends. Who needs professional advice when your
new buddy from the gy m can giv e y ou some great tips? If his stock
suggestions are as good as his abs workout tips, y ou can't go wrong.
7 . Rely on the pundits for adv ice. With all the ex perts o ut there
crowding the airwaves with their recommendations, why not take their
adv ice? But which advice should y ou follow? Cramer may say buy, while
Buffett say s sell. And remember that what pundits sell best is
themselves.
The temptation to sell
is always when the
market drops the
furthest.
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8. Go with y our gut. Fundamental research may be OK for the pros, but
it's much easier to buy or sell based on what y our gut tells y ou. Had
problems with your laptop lately? Maybe you should sell that IBM stock.
When it comes to hunches, irrationality rules.
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9. React frequently to market v olatility. Responding to the market's
daily ups and downs is a surefire way to lock in losses. Ev en professional
traders have a poor track record of guessing the market's bigger shifts,
let alone daily fluctuations.
10. Set it and forget it. Ignoring your portfolio until you're ready to cash
it in giv es it the perfect opportunity to go completely out of balance, with
past winners dominating. It also makes for a major misalignment of
original investing goals and shifting life -stage priorities.
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1 Sources: ICI; Standard & Poor 's. The stock m arket is represented by the S&P 500, an unmanaged index considered representative of largeca p U.S. stocks. T hese hypothetical examples are for illustrative purposes on ly, and are not intended as investment a dvice.
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