Page 437 - How to Make Money in Stocks Trilogy

Twenty-One Costly Common Mistakes Investors Make 307

ity in equities, you can protect yourself quickly at low cost and take advan-
tage of highly profitable new trends as they emerge.
18. Speculating too heavily in options or futures because you see
them as a way to get rich quick. Some investors also focus mainly on
shorter-term, lower-priced options that involve greater volatility and risk.
The limited time period works against holders of short-term options. Some
people also write “naked options” (selling options on stocks they do not even
own), which amounts to taking greater risk for a potentially small reward.
19. Rarely transacting “at the market,” preferring instead to put
price limits on buy and sell orders. By doing so, investors are quibbling
over eighths and quarters of a point (or their decimal equivalents), rather
than focusing on the stock’s larger and more important movement. With
limit orders, you run the risk of missing the market completely and not get-
ting out of stocks that should be sold to avoid substantial losses.
20. Not being able to make up your mind when a decision needs
to be made. Many investors don’t know whether they should buy, sell, or
hold, and the uncertainty shows they have no guidelines. Most people don’t
follow a proven plan, a set of strict principles or buy and sell rules, to cor-
rectly guide them.
21. Not looking at stocks objectively. Many people pick favorites and
cross their fingers. Instead of relying on hope and their own opinions, suc-
cessful investors pay attention to the market, which is usually right.
How many of these describe your past investment beliefs? Poor methods
yield poor results; sound methods yield sound results.
Here’s some special advice just for successful intelligent men who believe
they are using CAN SLIM. Stop trying to make CAN SLIM much better by
adding your favorite tools, market indicators, special formulas you’ve cre-
ated, other services, publications, opinions of experts on TV, your own opin-
ion of the economy or market, past habits, value measurements, or other
diversions that dilute results and create confusion at decision time. Follow
the rules, kick the ego, stay on track.
After all of this, never feel discouraged. Remember what Rockne said:
“Build up your weaknesses until they become your strong points.” It takes
time and a little effort to get it right, but it’s worth every minute you spend
on it. America offers a never-ending parade of new, growing companies. You
can learn to invest with knowledge and confidence to protect your money
and find and properly handle highly successful companies. You can learn
how to successfully invest in stocks.