2 Stock Tips That Will Ruin Your Portfolio

Ticker symbols combined with online brokerages enabling investors to trade at home has sparked flocks of traders to believe wealth can materialize overnight. This, of course, isn't true; making money in the stock market takes patience. Investing is simple: look for excellent, reasonably priced businesses and hold them for the long haul. Don't let mischievous know-it-all traders convince you otherwise. On that note, here are two common stock tips to avoid.

1. Buy low, sell high
The best way to make money in the stock market is to buy low and sell high, right? Wrong. Investors who make this strategy their focus will be surprised to find out that many of the stocks they buy on their way down unfortunately proceed further into the abyss. If you're lucky, some may stall or even bounce back up. But it only takes a few losers to hurt your portfolio.

What's the better way? Find excellent companies available for reasonable prices and hold them for the long haul. Attempting to profit from volatility is a gambler's game. Just look at Apple (NASDAQ: AAPL  ) over the past two years. Investors who attempted to buy Apple on its way down from $700 according to the "buy low, sell high" mantra have thus far been rewarded with further losses:

AAPL Chart

AAPL data by YCharts.

Now zoom out to 10 years:

AAPL Chart

AAPL data by YCharts.

Long-term investors have seen Apple shares appreciate 6,150%, while the market has appreciated just 76%. With the shares yielding close to 3% in dividends, you can bet that more than a few longtime Apple investors are living on Apple dividends. Even when you narrow the time frame down to five years, Apple shares are up 145% versus the S&P 500's paltry 13%.

2. Time the market
If you were investing in 2008, 2009, or even 2010, you'll likely recall at least a few friends or family members questioning your sanity. During those times, stock investing had a lot of negative sentiment around it; the stock market would crash again, people said. Turns out those were the best times to invest.

Timing the market won't get you anywhere special. Even worse, if market timing brings you success, you might become overconfident and lose a huge portion of your money the next time you attempt to time the market.

What's the better way? Once again, find excellent, reasonably priced companies to hold for the long haul. Over the last five years the S&P 500 has rewarded patient investors with a 76% gain -- not spectacular, but it's not bad either.

Be patient
Avoiding both of these stock tips requires patience -- a trait most investors seem to miserably lack. But if you are one of the few individuals Foolish enough to invest your money with a 10-year time horizon, I'll bet you'll make a great investor.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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  • Report this Comment On April 29, 2013, at 8:41 PM, stockwatcher0153 wrote:

    Other people say "Buy and Hold" is the bad strategy…

  • Report this Comment On April 29, 2013, at 9:08 PM, H3D wrote:

    Your "last 2 years" graph is actually one year.

  • Report this Comment On April 29, 2013, at 9:28 PM, speechisntfree wrote:

    "2 Stock Tips That Will Ruin Your Portfolio".....

    (1) Listening to online analysts.

    (2) Listening to online bloggers.

  • Report this Comment On April 29, 2013, at 10:54 PM, buzzltyr wrote:

    Pretty good advice. Buy companies with good numbers and hold on to them.

    The problem with timing is you rarely hit it right, and every mistake you make costs you.

    Looks easy, but the know it alls that tried it this year got smacked big time. The pros have been telling us to sell every month since november

  • Report this Comment On May 05, 2013, at 1:40 PM, Opes185 wrote:

    Daniel,

    Your first example isn't necessarily correct. People buying "on the way down" in an S&P 500 index have been rewarded, same thing with Netflix. Come back in several years and people who bought on the way down will come out on top.

    Regards,

    Alec

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