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Money Mistake Monday – The Learn Before You Invest Syndrome.

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Photo by thelastminute

When I graduated college in 1994, I did not know anything about investing. Nothing. I have written before about how I spent money like it was going out of style back in those days, and one of the things that I did with my money was chase stocks. Remember the internet boom? I was there – buying and selling stocks and not having a clue about what I was doing! Everyone I knew was making a killing in the stock market, so I had to get in, right? I should have stayed out.

While it’s true that I did make some money on a few stocks, the majority of them were losers. Did you invest in any losers during that time too? I felt like an idiot – here I was throwing money at companies I had never even heard of because I had heard something from somebody about how they were poised to take off. I should have just put most of my money in a trash can, as I probably had a better chance of getting some of it back

I guess my point is that if you do not understand investing in individual stocks, either take the time to do so or just invest in mutual funds (i.e. index funds) and let the professionals do the work. I had no place investing in stocks and I deserved to lose whatever money I did. Too many people chase stocks hoping to get rich and end up losing their shirts. Don’t let this be you!


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Comments (8)

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  1. You hit the nail on the head with your last point. Some PF writers insist that no one should ever invest in individual stocks and ONLY invest in broad based index funds. That just simply isn’t true. Sure, if you only want to invest passively and never look at your holdings, a broad based fund probably IS the way to go. But if you have an understanding of the industry and its players and if you have the time, willingness, and interest to invest in individual stocks, I say by all means, go for it.

    But like you said, Don’t Chase Stocks. I’ll add, Set Up A Stop Loss.

  2. David says:

    Thanks Ron, appreciate your comment and input!

  3. Yeah, the late 90s was a horrible time to get into the stock market. Unfortunately, as the market was peaking, the media got really excited about it and a lot of people jumped in on the hype just before the whole thing fell apart.

    I’ve made money in the past few years investing in individual stocks, but it takes hours of research each week as well as good sense and a bit of luck. Since you’ll never know as much as the professionals, you also need a long-term outlook so you can take advantage of growing companies rather than expecting hype to push an inflated stock even further. Finally, you need to start and learn with money you aren’t afraid to lose — otherwise the first time you try to ride losses, you’ll panic and sell just before the stock recovers!

    I have been successful in the past, but I see a lot of wisdom in the idea of an efficient market where I have less information than most of the professionals… so I play with 10% of my investments and let the rest sit in more diversified funds.

  4. David says:

    The 90’s were a rough time, that’s for sure. I just hope people learned from it!

  5. Duncan says:

    Hi there,

    Thanks for using my photo! If you could, please change link to my blog instead of my flickr account:
    http://thelastminuteblog.com

    as per:
    http://www.flickr.com/people/thelastminute

    Thanks!

  6. […] have to admit, that when I first started investing I made a lot of mistakes. I still do. My Two Dollars provided us with his take on investing without educating yourself. My only comment for new […]

  7. […] Two Dollars – Money Mistake Monday – The Learn Before You Invest Syndrome. I’ve been guilty of breaking this rule […]

  8. […] -Money Mistake Monday – The Learn Before You Invest Syndrome. @ My Two Dollars […]

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