This adage isn't as easy to act upon as it may seem.
My colleague Adam Wiederman has a great piece telling Fools about his losing position in Allied Irish Banks
A stock's seductive story, combined with the enthusiasm of the crowd, can sometimes cloud the clearest of investing minds. Maybe it's futile, then, to tell these cautionary tales.
Well, I'm going to give it a shot anyway. This lesson's far less psychologically sticky than Adam's battle with confirmation bias. It's one you can easily apply, and should help you to avoid losing money. Sound good?
Not just a platitude, dude
You've surely heard that investing in emerging markets carries elevated risks. Of course, that's painting things with a pretty broad brush. For example, India is no China. But in general, there are serious pitfalls to contend with when you start looking at countries where governments are prone to topple, there's violence in the streets, or corruption is ingrained in the business culture.
Globetrotting Fool Bill Mann boiled it all down to this key issue back in 2006: "Investing in another country means that you need to have an understanding about what the people to whom you are entrusting your money think about people like you."
From Russia, without love
Russian businessmen have repeatedly shown that they don't think much of people like you. And by that, I don't just mean American investors.
Citing the "unpredictability of administrative processes" in Russia, Swedish retail behemoth Ikea has iced all its future Russian investments. The company's founder has spoken about being gouged on electricity prices there in supposed retaliation for an unwillingness to grease some palms. In a statement very reminiscent of that Bill Mann quote, Ikea's country director conveyed the feeling to an interviewer that "someone somewhere does not like us."
So it is that Ikea joins a very long list of Western businesses to catch that frigid feeling. Pan American Silver
Despite this boorish behavior, the allure of Russia's resource wealth continues to draw in the likes of Kinross Gold
Meatballs to morals
For me, this is an experience that I don't need to suffer from firsthand. Russia is a big-time "avoid" in my book. That definitely rules out folks like Mechel OAO
Yes, the country's stocks often look cheap, but as my colleague Ivan Martchev argued recently, they may always remain so.
Allied Irish Banks is a Global Gains recommendation. Berkshire Hathaway is both an Inside Value and a Stock Advisor selection. Total is an Income Investor pick. Rush in to any of our newsletters free for 30 days. Get it, rush in?
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Allied Irish Banks and Berkshire Hathaway. It also has this delightful disclosure policy.