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Avoid These 4 Common Investing Mistakes

It's been a great year for investors who stayed in the market, and stayed disciplined. The S&P 500 is up more than 25% on the year, and the Dow Jones Industrial Average has gained 21%.

But making money isn't just about finding stocks/investments that will increase in price. It also involves avoiding the common investing mistakes that prevent retail investors from enjoying record-high markets.

To make sure you aren't making any of those money-losing mistakes, here's a list of the four worst investing strategies we see happening today.

Four Common Investing Mistakes Made Today

Investing Mistake #1: Not Investing at All: The financial crisis has caused millions of Americans to lose confidence in the markets. Today, only 50% of middle-class Americans own stocks or bonds. That is down from 66% in 2008.

Instead, some people have all their money sitting in savings accounts right now. The bank pays them a whopping 0.2% to store their money, while the bank leverages it elsewhere in its own house account.

It's easy to grow fearful of another major market event. But the markets have stormed back since 2009, rising more than 100% – and those are gains you can't get any of unless you invest.

There are always safe companies with strong fundamentals that can absorb market shock. There are international equities that provide safe returns at lower risks. It's just a matter of knowing the types of companies to invest in.

Our Chief Investment Strategist Keith Fitz-Gerald recommends investing some of your money in companies he calls "Glocals." These are companies that are both local to the United States and have an international presence, helping you capture growth from the international markets, even during problems at home.

Investing Mistake #2: Not Using Trailing Stops: If you own stocks or equities, there is little reason for you not to use trailing stops. Without them, you can lose your profits – and your principal.

Trailing stops are a stop-loss order that investors can set according to the price of their stock as it increases or decreases. The stop is set at a percentage lower than the current price. They are important because in times of volatility, an investor is able to sell his or her position automatically to protect both gains and principal.

Join the conversation. Click here to jump to comments…

  1. yngso | November 21, 2013

    Sorry, I´m a bit slow: A thorough explanation of what stops/trailing stops are and how to use them would be greatly appreciated, probably not only by me.

  2. Robert in Canada | November 21, 2013

    Stops are when you call your broker or go to your online stock account and enter a price to sell your shares that is below the current price, and also set the period of time your shares are for sale (1 day, or 2 months, etc)

    If the share price drops to the price you entered, your shares are automatically sold.

    I find most often that when my shares get sold at a stop price, the price goes back up a few days later. So that means I've sold my stock at a low price then if I want it back, I have to put in a low bid and hope it drops again so I can buy it. If it doesn't drop to my bid price, I no longer own the stock and cannot buy it at the same price I sold it for. It's the worst of both worlds.

    • AK | November 22, 2013

      Exactly, trailing stops are nothing more than an attempt to time the market, which cannot be done successfully by anyone.

  3. jpmore | November 22, 2013

    I wasn't sure at first what "principle" would be lost. It should read "principal".

    • Rebecca Kerins | November 22, 2013

      Good catch! The error has been corrected. Thanks for reading Money Morning!

  4. agnes audu | February 25, 2014

    from nigeria, how do i own or buy share in morningmoney.

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