The single biggest investing mistake I've witnessed over the years

[Alxndr]

I've read countless threads on Reddit and spoken to dozens of retail investors in real life and the biggest mistake I've seen all boils down to psychology.

When they look for a stock to buy, almost every one of them picks a stock that is either near all time lows, or has had a really significant pull back, at least 50% or more. And their reasoning is very understandable, at first glance.

They want to buy a stock that they think is low, so that "when it goes back up" they'll make hundreds of % profit. The chart is playing psychological tricks on their mind because they see that it used to be $500 and now it's $50, therefore it MUST be undervalued / bargain.

Compare that to a stock where the price is at all time highs, or close to it and they immediately reject it because it's so high, it MUST be overvalued and will surely crash soon and that's when they'll buy it.

But what they fail to realise is there's usually really legitimate solid reasons for a stock being -90% from all time highs and a stock being ~5% from all time highs. A companies stock that is at the highs probably has a really high profit margin, a really healthy business model, good finances, solid and stable company.

Whereas a companies stock price is -90% is probably going through all kinds of financial ruin, racking up debt, poorly managed and overall just a terrible company to invest in. Yet somehow the overwhelming majority of novice investors are attracted to these rotten egg companies instead of the healthy ones. And it's all because of what the chart looks like.

This is why so many new investors don't buy the entire S&P500, or a global index fund in general, the reason is almost entirely based on the fact that global markets are usually always at the highs, even when they're -20% or so they'll still opt for their -90% stock pick because -20% from the high still seems too overvalued.

I find this topic really interesting, I might write a book about it.

[Angel]

Many would do background checks on the stock entity (product or company) and they buy low hoping to gain the most profits quicker than a higher cost yet more reliable shares.

Personally I fall into this category because the more secure but higher priced share is less likely to get a decent profit and (in my opinion) just wouldn't be worth my budget. I understand that it could boom but generally they don't compared to a dropped price stock.

[Vinz Clortho]

The gambler's fallacy has been extensively written about.

[Corona Scurrae]

Reddit is all about buying high, selling low. Here is some good advice in regards to investing. Do your own research and never ever touch 0dte options

[kingjames488]

everyone's just looking for a quick buck...

that's not how warren buffet does it tho, he sits on good stocks.

that's investing.

put your money into something worth it and it'll pay you back... gamble it away and you'll lose it.

[Alxndr]

Escrito originalmente por Angel:

Many would do background checks on the stock entity (product or company) and they buy low hoping to gain the most profits quicker than a higher cost yet more reliable shares.

Personally I fall into this category because the more secure but higher priced share is less likely to get a decent profit and (in my opinion) just wouldn't be worth my budget. I understand that it could boom but generally they don't compared to a dropped price stock.

But this is exactly the problem I'm talking about. You think a stock that's -90% is

A) More likely to go up because it's "already -90%"
B) It has potential to go up much more than other stocks, because it's -90%

This is the precise trap so many retail investors fall into. They're looking at where the price used to be and where it is now and making their decision based on that.

Buffet bought Apple back in 2016 when it was essentially at the peak, only 10% down from the highs. It had a market cap of $500billion and everyone thought he was buying the top.

Since then it's gone up 550%. Obviously apple is just one example but I've lost count of the amount of people I've seen reject a really solid profitable company simply because of what the chart looked like.

[Angel]

Escrito originalmente por Alxndr:

But this is exactly the problem I'm talking about. You think a stock that's -90% is...

It's a fair point and you're correct that some can boom. The thing with stocks is that people can only take educated guesses. Bitcoin did this if seeing it in recent years that it was high but kept going up.

Personally I can see it similar to real estate that the product or share in this case won't go down but it will continue to go up.

Apple is an interesting example however you'd need to factor that the 550% returned claimed was over the course of near 9 years. I actually got banking shares that doubled its value within the course of three weeks with a spike. So the timing duration is a huge factor I.e. do you sit and wait for many years or do you take the risk for shorter term investing. (Not saying all investments spike as it's rare but crashed/starter stocks seen to spike more often).

[kbiz]

They are speculators. A 10% pullback from the lows equates to a 100% gain to someone that bought it down 90%.

They are looking for market action, not a fundamental turnaround.

[Alxndr]

Escrito originalmente por Angel:

Escrito originalmente por Alxndr:

But this is exactly the problem I'm talking about. You think a stock that's -90% is...

It's a fair point and you're correct that some can boom. The thing with stocks is that people can only take educated guesses. Bitcoin did this if seeing it in recent years that it was high but kept going up.

Personally I can see it similar to real estate that the product or share in this case won't go down but it will continue to go up.

Apple is an interesting example however you'd need to factor that the 550% returned claimed was over the course of near 9 years. I actually got banking shares that doubled its value within the course of three weeks with a spike. So the timing duration is a huge factor I.e. do you sit and wait for many years or do you take the risk for shorter term investing. (Not saying all investments spike as it's rare but crashed/starter stocks seen to spike more often).

Definitely, if you're looking to try and make a quick profit then gambling with a stock that down -90% could be a viable option but I think you'd have to be incredibly lucky with your timing.

But we're talking about investing, not trading.

For me personally I will always pick a stock (or index fund) with a very high probability of getting me 9% per year over the long run than a stock with a very low probability of getting me a 100% return in the short term.

Not only do you have to time your entry well but you need to time you exit well too. Do you sell at +40% or +80% or do you wait for +100% but then the stock goes all the way back down to your entry price again :/

[Apollo702]

It is time to save everyone the trouble and boil it down.

Hire a broker and dispense with all of this.

I retired at age 28 in 1998 and was actually pretty good at this. I quit and hired a broker. My nest egg has survived multiple recessions, corrections, personal disasters and to this day I still live with freedom and quiet comfort.

Doing this well is a FULL TIME JOB and virtually nobody is equipped to pull it off. Hell, even the brokers make mistakes. Sometimes whoppers. If they struggle this badly, the common schmuck is going to do far worse.

I have degrees in business and political science. It's not enough. Hire a pro.

In the 90's the internet was a tiny fraction of what it is now- and that likely is a better thing. It was probably easier to make better decisions with less information then instead of now.

Why?

Just look at this very forum. The vast majority of the posting are bad attempts at repeating hogwash from scammy manosphere grifters.

There is more information than ever. Most of it's bad and look around. 99% of the 40 year old virgin gamers are clearly clicking on all the wrong stuff.

Maybe a few people either worked for it or stumbled into some money. All it takes is a few bad clicks to make it go bye-bye. It would be a lot more fun to go to Caesar's Palace and bet on red.

The entire reason for posting is I don't want to see more people get a few bucks in their pocket, get arrogant and go broke again and then after telling their boss to F-off have to come back with their tail between their legs and beg for their job back.

Know your limitations and either hire a pro or do something like put it into a low cost index fund at let simple math work in your favor.

[Dutchgamer1982]

I always buy stock for divident only.

so I look for the divident to current stock price

I want a divident of 7% annually of current price or more.

I ofcourse like stability so I will look for financial stability historic payments etc.. so I prefer one thats close to that 7% but has been paying that decades and can be expected to contrinue doing so over one that only has recently spiked up but has indicators that may mean they can't be trusted to keep doiing that..

I buy once and never care what the price of the stock does at all.. I just draw my annual divident. never sell never care for price of stock after buying....

the only stocks I occationally sold was when they switched from paying divident to buying out their own stock driving up stockprice.. since I care nothing about stockprice if they stop paying divident... thats not stock I want to keep.

and yes when times are bad.. great sales are to be had.. for often it's whole sectors that get dumped.. like dotcom in 90s.. housing in 00s and such.. but theres always a few firms amongst all those who are financially sound.. and thus are undervalued.. aka who due dropped stockprice but stable and relatiable divident have dropped to quite nice price to divident ratio..

stock that rises a lot in price but with less than 7% divident to current price I not care for.. I buy to keep... so I not buy stock at low to presume it rising..

but I do buiy stock at low cause thats when you can find sometimes very nice stock that give 13 euro a year divident one very 100 euro of stiock purchased due the price of said stock having tanked....

you buy to keep.. only idiots buy gambling it to become worth more..

you buy stock for divident
houses for rent
and land for harrvests..

you turn a large sum now in a perpetual small passive income.
thats investing

to buy low hoping to sell high later.. thats gambling and that one should evade./.

[swillfly]

It all boils down to a mad numbers game . . . I'm not gambling my $ on any shysters from Wall Street or Vegas or D.C.

Ain't no easy $ for everyman regulars --> gotta work for $.

[salva早晨享用的咖啡]

good stock always at premium price because worth high price
water is wet

some people people buy cheap thing think bargain but is just rubbish

[Apollo702]

Part 2:

There are a few successful members here who I am pleased to be friends with.

The things that we have in common are:

• We put a smile on our faces and avoid the negative.
  
  
• We keep it quiet and never give specifics.
  
  
• We like to keep it modest and be thankful for our blessings.

This is the key to knowing it's real.


The red flags for knowing when it's fake:

• The negativity.
  
  
• Flashing it too hard.

[permanent name]

you have professional acess to non-public charts to know that?

[Beltneck]

Nope. The worst investment is children. Because the last thing the world needs is more people.