There some classic mistakes that people make when investing in the stock market that will guarantee that they lose their money. In order to be a successful investor you need to avoid these mistakes. There are a number of challenges to becoming successful in stock market investing and the mathematician Carl Jacobi loved to say "invert, always invert" which is a very good tool to use in this situation. Focusing on the ways to lose money can be more effective than knowing the ways to make it. The point is to try and minimize the mistakes to stay ahead of the game.
Trade fast and trade often
Warren Buffet's partner in business, Charlie Munger refers a lot to the great mathematical advantages you can enjoy simply by 'doing nothing' to your portfolio. To lose our money very quickly, we're going to blindly ignore the extremely large tax benefits of holding onto the stocks long term and consider how brokerage will impact things. A person who buy and sells or 'turns over' all of the stocks that are in their portfolio several times during the year is going to typically be a few percents in back of the eight ball even when the brokerage rates are at a low 0.3%.
Follow the mainstream media
Munger spoke of the human condition of 'incentive-caused bias' often; it explains how the media functions in regard to the stock market. It is a widely held belief that the most emotion, dramatic and confrontational coverage of events will sell more newspapers than the more factual and rational reporting. This might be correct, but the decline in newspaper sales and circulation would suggest otherwise. The tendency to induce a panic state in investors when a state of calm would better serve them suits the media's interests much better.
The incentive-based bias doesn't just affect the media, though. You can see how the honest managing directors are able to first convince themselves and then convince their board members and finally their shareholders that an offshore acquisition or a hostile takeover is beneficial for everyone and especially themselves.
Don't fall into the trap of bad investing practices; you can learn a lot from the experts who can give great advice on investing in the share market.
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