5 Mistakes You’re Making in the Stock Market

5 mistakes you are making in the Stock Market

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1.You’re trading too much

The only one that will win for sure if you trade over and over is your broker with the fees you’re generating. The stock market is a no strike game. There is nothing forcing you into action.  If you have a sound investment process you’re purchasing stakes in businesses not just a stock that is trading on the stock market and your appraisal of that business should be a long term process.

The trading game is a game filled with those that have better and quicker information than you.  The way to beat them is to have a longer time horizon and to be more patient and less reactive.

In the long run stocks and the market correspond to earnings and GDP growth, in the short term you are at the mercy of the market.

If you’re too easily convinced you need to switch then you most likely made an mistake in your initial investment process. As a starting point, examine your stock selection process with some of our Free Investment Checklists from the greats: Investment ChecklistBruce Berkowitz Investment ChecklistCharlie Munger’s Investing ChecklistPhilip Fisher’s 15 Points.

Ray Dalio

2.You’re too worried about macroeconomic factors or what you think the market will do


There is no completely normal in this world and there will always be a crisis in Greece, or South America, or in the US, or some war and reason to be bearish. Do not underestimate risks to a business model but don’t be overly concerned with factors out of your control. Demand a margin of safety to deal with being wrong.  If you practice what we preach you’ll be learning to value stocks by valuing corporations and compounding knowledge on how best to do that daily instead of worrying about Congress and things out of your control.

Businesses with an adequate margin of safety can accommodate different business working conditions and good managements take advantage of recessions.

Many things in the markets are not within control. Many try to predict the Fed, or directions of the economy and there are a lot of smart people that can’t even get that right. Why do you think you have an edge doing so if even people like Warren Buffett are wrong about them from time to time?

This goes back to #1. If you’re too worried by macroeconomic factors you end trying to time the market, which is a fool’s game.

Most people trail the performance of the market, and the predominate reasons they do are Fees and attempting to time the market.


3.You spend a lot of time thinking about whether the market is overvalued or undervalued 

There’s been periods of time when it has been dead obvious that market is overvalued or undervalued but most of the time there will be pockets of undervalued and pockets of overvalued and you’re always best doing your homework and learning and looking for undervalued stakes in businesses and not worrying where the market is.

The stock market is compromised of businesses and those businesses are hopefully creating value. In the long term the stock market tends to follow the creation of that value, and earnings, but in the short term you can see some really ridiculous things.

The market itself doesn’t care if it’s overvalued or undervalued and both conditions can persist over periods that are surprisingly long.


4.You get too worked up when the market has a really bad day or even a good day

Mr. Market is a fickle and tends to display maniac behavior from the strangest things. While one can’t totally avoid the market prices there is no need for obsessing on a daily basis.

I usually can’t totally avoid what the market did but I don’t follow my holdings price super closely. I tend to monitor prices of things I’m interested in. One of the most peculiar practices to me is hearing on the nightly news why the Stock Market moved some percent in some direction. They often give some extremely creative explanation as to the movement and why and it’s a total waste of time to hear.

Most of the time I shake my head and wonder how much the actual price change affected the narrative. If the market goes down people find reasons to attribute to it.

How many times have you shook your head and wondered well if the Fed said it may raise rates shouldn’t the market do this and it does the opposite.

If you own a stock and a big down day, or a big up day changes your opinion too much then maybe you should revisit the logic that made you buy.

RNG Joke



5.You pay too much for a stock


When you first start out the chief mistake you make is you are overpaying for stocks. That is why you are taught what a Price to Earnings Ratio is, book value, Owners Earnings, and begin to learn how to estimate Intrinsic Value. While valuing a stock is never that easy as businesses are moving living entities with various parts of various maturities, and various businesses, the chief mistake amateurs make is paying too much for a stock that is in favor or hot company. Avoid that mistake!