Here are a couple of great ways to blow your hard-earned cash in the stock market. If you want to lose your money, definitely follows these rules. Conversely, avoid these strategy mistakes in order to make your investing more profitable.
Buy cyclical stocks at the top
Humans love to extrapolate; it's been proven time and again. When a cyclical stock such as a company that deals in steel or some property development company has some tough years in its recent past, the investors tend to only see the bad and assume that those bad times will last till the end of time.
But, the opposite may also be true; the steel company may have had a strong demand from Chinese companies and manufacturers to show a few years of boom or the property market might have had a positive turn in recent years. The investors might extrapolate nothing but good things in the future but, given the overall history it may be a very bad investment.
Follow overly acquisitive management
There are some companies with management teams that are hell-bent on growth no matter how much it may harm the company. These overly-acquisitive managements will often have delusions of grandeur and will be very prone to getting themselves and their companies into trouble. When interest rates rise, the cash flow must be diverted so that it can service the debt rather than the dividends or be deployed into the business.
The new acquisitions might even cloud the company's financial accounts, too. The bankers will be fooled and the shareholders will be none the wiser until the gravity of the tough situation finally brings to light the huge problems but by then it is too late. This actually causes the collapse of a company because it was too speedily built and backing such a company and its management will definitely eat a hole through your wallet.
Take a few great tips and hints on investing from Hedge Fund Manager and Expert Investor Andrew Baxter as he discusses investing in the Australian Share Market. Avoid the mistakes that will drain your account of your hard-earned cash.
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