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Strategies & Market Trends : Trend Setters and Range Riders -- Ignore unavailable to you. Want to Upgrade?

To: Susan G who wrote (2839)	9/8/2001 12:23:02 PM
From: Susan G	Read Replies (1) \| Respond to of 26752

Ego, Fear, Greed Beget Poor Buy Decisions By Jonah Keri Investor's Business Daily Investor's Corner Monday, September 10, 2001 In investing, it pays to know your own weaknesses. That means reviewing past trades, identifying your mistakes and always striving to improve. Think you’re above all that? Then you’re skating on thin ice. You also can’t afford to make the same errors when the next bull market comes. Knowing your weaknesses requires plenty of humility. “You have to be willing to subject yourself to personal scrutiny,” said Bryan Anderson, principal of San Francisco-based money management firm Anderson, Martin & Co. “You have to ask yourself: ‘Do I have a need to be right? Do I have to feel smarter than everyone else?’ You have to be willing to admit your mistakes and say, ‘I’m human.’ ” Here are some pitfalls that can hurt stock-hunting investors. Five Deadly Sins home.earthlink.net Bottom fishing. If a stock is plunging, your best move is to let it go. Yet many try to catch the falling knife. That’s greed taking over. Why wait for a stock to prove its mettle, you figure. You’ll just buy at the bottom and grab the big score. Don’t fall into that trap. Wait for your stock to carve a solid base. When it breaks out on heavy volume, that’s your time to buy. Buying too late. Your stock sets up in a perfect base. It sports stellar sales, earnings growth and profit margins. It’s in a leading industry group. The market is starting to hum. It flashes an ideal breakout. But at the moment of truth, you get gun-shy. You wait another week or two. Then, satisfied all’s well, you dip your toes into the water. Patience is a virtue. But watching an opportunity whiz by shows indecision. You wait to allay your fears and lower your perceived risk. Yet waiting only raises your risk. Buying a stock more than 5% above its pivot point can mean a quick loss if the stock pulls back. If it falls 8% from your buy point, you’ll be shaken out in no time. Failure to buy. You let the stock break out, shoot past its 5% threshold and stage a big run-up without ever buying. You just let fear beat you. Maybe a past bear market spooked you away from stocks. Maybe your Uncle Morty lost his shirt buying stocks in 1974. Whatever the reason, try to block out that emotion. If a technically and fundamentally sound stock breaks out in a strong market, go for it. Throwing good money after bad. You buy a stock you’re sure will yield huge gains. Instead, it tanks. But you don’t cut your loss. You buy more shares. It falls a little more. You buy again. One way or another, you have to prove you were right all along. Don’t let your ego take over. If a stock isn’t working, let it go. There are 10,000 other fish in the sea. Buying in a bad market. Waiting for a new bull only tries your patience. You’ll show everyone, you say. You’ll buy a few stocks and show the market who’s boss. Even when a stock looks perfect, a weak market will usually torpedo your chances for gains. The market doesn’t care about you or your goals. Follow its cues, waiting for clear confirmation of a new bull. If you try to outsmart the market, it will eat your portfolio for lunch. investors.com