How Not To Buy Stocks – Do These And You Are Sure To Lose Money

If only I had read an article like this before I dived into the world of stock investing. I must say, three years ago I knew absolutely nothing about how to buy stocks. Of course, through that experience I learned several ways on how to buy stocks and lose money.

Buy stocks without doing research – I joined a discount brokerage and went shopping for stocks right away. I had no clue what I was supposed to look for so I just picked random names I liked and bought a few shares here and there of each.

I must admit, I thought I was doing quite well. I mean, some of the stocks I picked ended up doing alright, but the majority of them when no where fast. So if you want to make sure you fail at buying stocks, skip the research.

Don't Consider the Trading Fees – Learning how to buy stocks the wrong way is easy when you don't consider trading fees. I must admit, when I joined the discount brokerage I was really excited about their $4 trades. What I forgot to calculate was the math.

I was investing an average of $10 per stock when I bought them. Shelling out $4 for a $10 piece of stock meant I was losing 40% right up front each time. When I decided to sell the stock I had to pay another $15 just to sell! You can see where I am going with this, it can turn into quite a fiasco.

Don't Diversify – The surefire method for how to buy stocks the wrong way is to buy a single stock and nothing else. Throw all your nest egg into one company. I mean, so many people do it, especially in their companies at work. What is in your company 401K?

Having all your eggs in one basket sets you up for quite a roller coaster, except there is no safety rails on this ride. You could easily lose everything.

Buy High and Sell Low – The market is fickle so if you want to set yourself up for failure, go with the masses. I admit, it is very tempting to see a stock going higher and higher and yet... higher again.

This makes people want to buy it more, increasing its demand and running the price up even higher. This is great right?

Sure, it can be sometimes, but if the stock is overvalued you are really learning how to buy stock the wrong way with this purchase.

To buy stocks the wrong way, sell the stock as soon as the price dips some. Even if the company is solid. Following the herd is a great way to go down the wrong path.

Hold On To a Losing Stock To Try and “Break Even” - I bought a popular stock for $63 a share, not too long later it dropped into the $40 range.

The research showed the company was not doing so well, but I wanted to at least get my purchase price back. I mean, it is sure to bounce back up right?

Fast forward a few weeks and it was in the $30 range. Dang, I should have sold it at $40 when I had the chance. Well, I am going to at least wait until it gets back into the $40 range before I sell it.

Fast forward... it is below $20 a share now. Keeping a stock when both the price and the company are going downhill is a sure way to learn how to buy stocks the wrong way.

Avoid Learning The Right Ways - If you really want to learn how to buy stocks the wrong way through the school of hard knocks, make sure not to discover the right ways.

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