Amid all the bad news that 2008 brought for investors, one thing encourages me more than anything else: People haven't given up. They still want to make money -- and they still believe the financial markets will get them to their goals.

Frankly, that sentiment surprises me. Sure, I still get plenty of messages from folks who are tired of hearing investment advice, who've decided that zero-interest Treasuries, insured bank accounts, and mattresses are the best place for their hard-earned dollars. That's fine -- I respect that decision, even though I'm convinced it won't work in the long run.

But despite those occasional pessimistic messages, I'm also hearing from people who are really taking a close look at their investments for the first time. The past year has taught us all some tough lessons, but people are finally resolving to figure out what they need to do to succeed. Among all the mistakes various readers have discovered in their investing, one dominates the others: putting too much money in popular stocks.

Falling for fads
One of the most common mistake investors make is to look back at good past performance and assume that it can last forever -- or at least long enough to cash in on a nice profit. Consider:

  • Until early 2007, big money-center banks like Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) were on top of the world, with good returns year after year. But while many hoped that the impact of the financial crisis would stay confined to subprime lenders, the contagion eventually spread throughout the banking system.
  • Agricultural stocks, such as fertilizer-maker PotashCorp (NYSE:POT) and seed-sower Monsanto (NYSE:MON), spent much of 2008 topping the top-gainer charts. Yet when the bottom fell out of the commodities markets, these stocks and their peers lost all of those gains and then some.
  • Now, investors have flocked to stocks that cater to discount shoppers. Wal-Mart (NYSE:WMT) and McDonald's (NYSE:MCD) were the Dow's only gainers in 2008, and many hope that they'll continue to provide shelter in a recession. But when the economy turns, will they fall just as quickly?

Unfortunately, there's a simple conclusion you can draw from all this: Investing in fad stocks is just about the closest thing to a guaranteed losing strategy you can find. Here are some reasons why:

  • When do you hear about a fad stock? After it's already become a fad. And that doesn't happen until a stock has already made some pretty big gains. For instance, think back to one of 2007's fad stocks, Dendreon (NASDAQ:DNDN). When did you first hear about it: before or after its landmark positive FDA panel vote? The best time for fad investing is before a stock becomes popular -- but that's a lot harder to do.
  • When people discuss fad stocks, they rarely have an eye toward the long term. You'll hear analysts project lofty price targets and explain in simple terms why the business should excel. But when it comes to cold hard numbers, you won't always see what you want in terms of fundamentals. It's easy to come up with a vision of the future in which any particular fad stock will do well. But ask yourself -- what makes that scenario more likely than ones in which that same stock tanks?
  • Investing fads tend to die with little fanfare. Instead, most stock pickers simply move on to the next fad, hoping that investors won't notice that if they weren't lucky enough to pick the exact top of the last fad, they probably didn't make nearly as much money as they expected.

It's great that the bear market of 2008 hasn't convinced everyone to give up investing for good. If all those losses make investors 1) take a closer look at their investing mistakes and 2) resolve to do their best to avoid them in the future, then perhaps we'll eventually all look back on this terrible episode in stock market history with something other than complete regret.

Prepare your portfolio for 2009 and beyond:

Fool co-founders Tom and David Gardner have always looked beyond current fads to try to identify the next big trend. With their Motley Fool Stock Advisor newsletter, you'll get a close look at their thought process, with recommendations and analysis that will guide your investing decisions for years to come. Try it out on us for 30 days.

Fool contributor Dan Caplinger does his best to stay away from the fads, despite the hype. He doesn't own shares of the companies mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor picks. Wal-Mart is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy is no passing fad.