#7:  Buying on tips, rumors, split announcements, and other news events; stories; advisory-service recommendations; or opinions you hear from other people or from supposed market experts on TV.

Do your research.  There is no easy way out.  Many people are too willing to risk their hard-earned money on the basis of what someone else says, rather than taking the time to study, learn, and know for sure what they’re doing.  As a result, they risk losing a lot of money.  Most rumors and tips you hear simply aren’t true.  Even if they are true, in many cases it is already priced into the stock and when the event actually takes place, the stock concerned will ironically go down, not up as you assume. 

#8:  Wanting to make a quick and easy buck.

Again, I saw this mistake made by almost every single client.  Wanting too much, too fast without doing the necessary preparation, learning the soundest methods, or acquiring the essential skills and discipline to be a successful investor.  Chances are, you’ll jump into a stock too fast and then be to slow to cut your losses when you are wrong.

#9:  Buying old names you’re familiar with.

Just because you used to work for General Motors doesn’t necessarily make it a good stock to buy.  As I was a broker in the Detroit area, I had a number of General Motors employees as clients.  It was like pulling teeth to get them to part with that stock.  Very few actually would.  Well their emotions got in

the way and most never saw GM was headed in the wrong direction.  As a result they watched their life saving get destroyed as GM went into bankruptcy.  Remember, many of the best investments will be newer names that you won’t know, but that, with a little research, you could discover and profit from before they become household names.  Did you recognize the name Google ten years ago?

#10:  Not being able to recognize (and follow) good information and advice.

Friends, relatives, certain stockbrokers, and advisory services can all be sources of bad advice.  Only a small minority of people giving advice are successful enough themselves to merit your consideration.  Outstanding stockbrokers or advisory services are no more plentiful than outstanding doctors, lawyers, or ballplayers.  Only one out of nine baseball players who sign professional contracts ever make it to the big leagues.  Most of the ballplayers coming out of college simply are not professional caliber.  Many brokerage firms have gone out of business because they couldn’t mange their own money wisely.  Look what happened to Merrill Lynch.  They had to be bailed out by Bank of America due to poor investments and leverage.  Better yet, look how many people blindly trusted Bernie Madoff and lost everything.  You have to do your own homework.  Trust no one blindly.

#11:  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.  Make sure you completely understand how options or futures work prior to delving into this world.  It’s very complex.  I’ve seen too many investors loose it all because they don’t truly understand what they are getting into.