As another part of the 2008 investment knowledge series I wanted to post of eight things to remember when investing in 2008. We already looked at ten investing mistakes to avoid in 2008, so now its time to take a look at what exactly you should be doing while your investing this year.
- Always remember that valuation of a stock does matter, no matter what the growth of a company is. Too often we hear the talking heads say that valuation doesn't matter because company XYZ has 100% growth, these are generally the stocks who take a tumble in a down market, because they have become overvalued due to this mindset.
- Always look for companies that have a continuous competitive advantage, otherwise known as wide moat. I know I've stressed this point a lot, but I truly believe it deserves to be stressed. The whole thesis of investing in a company should be that its current advantage is sustainable.
- Momentum stocks can fall out of favor quickly, so tread carefully. Remember when Yahoo (Nasdaq:YHOO) was the hottest internet company out there? Now Google (Nasdaq:GOOG) and Baidu (Nasdaq:BIDU) have taken the throne in the internet area and look invincible at the current moment, but investors need to keep a watch on the situation at all times.
- If you are going to run your own portfolio, you have to be able to put some time into research and keeping up with your stocks. This is the information age, so the information is clearly out there and available for you.
- Let top notch mutual fund managers help you out in your personal portfolio. I don't understand why more individual investors don't look at the top holdings from successful managers and start their research with some of those names.
- Never let a trade become an investment. If you buy a stock based on something like a hurricane, and it doesn't happen, sell the stock and get them next time.
- Diversification is absolutely essential. Concentrated portfolios might look great for a while, but over the long haul diversification is the only way to go.
- Do stay positive. Investing isn't easy and anyone can get very frustrated at times, but with perserverance and smart investing you should come out way ahead.
It's the new year! There's no reason why we can't be positive. Although some of the articles above do suggest otherwise. Anyway, we shouldn't be disheartened. Research is one of the most important things you can do before investing. Perhaps through research, you'll find that there are some things to be happy about after all. You can easily get back in the game with new knowledge.
Posted by: Jen, writer MembershipMillionaire.com | January 9, 2008 1:27 PM | Permalink to Comment