5 Ways Not to Invest in 2013
Unfortunately, lots of people lose big every year because of these five mistakes, but you can keep a closer eye for the next time around, writes John Heinzl, reporter and columnist for Globe Investor.
To paraphrase the philosopher George Santayana, those who don't learn from stock market's past are condemned to repeat it.
With that in mind, let's look at some lessons investors learned-or at least should have learned-in 2012. Many of these lessons are timeless, yet investors don't always heed them.
1. Following the Herd Can Get You Trampled
When Apple (AAPL) was trading for more than $700 back in September, the media were filled with breathless stories about folks waiting in line for the iPhone 5 and analysts boosting their price targets to $800, $900, and-in a couple of cases-$1,000 or more.
Then came the Apple Maps fiasco and the ouster of the company's top software and retail execs, which-together with growing competition from Samsung (SSNLF) and Microsoft (MSFT)-sent the stock down more than 25%. When everyone agrees that a stock is going higher, it often means risks are being ignored.
2. Beware Stocks Bearing High Yields
The next time you're tempted by a stock's outsized dividend yield, ask yourself why the payout is so high.
Yellow Media (Toronto: YLO) is the poster child for why investors need to be skeptical of high yields.