Three Biggest Investment Mistakes

03/20/2014 9:16 am EST

Focus: STOCKS

Ned Riley

Founder and CEO, Riley Asset Management

Riley Asset Management's Ned Riley shares what he thinks are the three biggest mistakes that investors make.

TERRY:  I’m Terry Savage from MoneyShow.com.  We’re talking today with Ned Riley of Riley Assistant Management, and before that he was the Senior Chief Investment Strategist for State Street Global Advisors; big, huge firm, so you’ve been around the industry for a while.  I’ve heard you talk about what people do wrong, so give us today the three biggest mistakes investors always make and keep making.

NED:  One is emotion.  They, unfortunately, no matter how many times you tell them don’t sell when things are depressed, don’t buy when everything is just ballooned up and clearly been inflated by the markets.  The biggest mistake is we’re all emotional.  I mean, we are basically living off of the media; we’re living off of the press.  We listen to Wall Street too much to be candid, and unfortunately, that which is being fed to us now is more of a short-term trading orientation rather than longer term.

TERRY:  Let me apply that.  In early 2014, January was just miserable.  What now?  I mean, are we saying well, the market’s too high, we’ve been through 13,000, 14,000, 15,000, 16,000; are we in that inflated time when investors should be taking some profits off the table?

NED:  I don’t think so Terry.  I think this is a secular bull market and secular basically implied somewhere between five and 10 years, and I think this market will head higher over the next four to five years.  It’ll be driven primarily by liquidity in the system.  The public will come back into this market.  They will be selling bonds to buy stocks, which will be another mistake that they had made, but they have enough money available and a very low allocation – two equities – so I think they have to build that up.

TERRY:  All right, so emotions the first big mistake.  Second big mistake?

NED:  not challenging enough.  I am a contrarian by nature, so I have to challenge everything that I hear and see coming out of Wall Street.

TERRY:  So be skeptical.  Third biggest mistake?

NED:  Trying to do it by yourself.  Individuals will try to think that this is a practice that they can do very easily, and I always say to somebody, look it, don’t perform a hot operation on me, because you’re not a skilled heart surgeon.

TERRY:  So get good advice.

NED:  Get good advice, sound advice, and one that’s long term in nature, and not necessarily trading oriented, because trading doesn’t pay off in the long run.

TERRY:  Okay, that is good advice from Ned Riley of Riley Asset Management.  I’m Terry Savage from MoneyShow.com.

Related Articles on STOCKS