3. Investing in stocks instead of in companies
"Buying a particular stock purely on the basis of market momentum or because you like a company's product or service is a sure-fire way to lose money," says CFA member Bob Bilkie, who's president of Southfield, M.I.-based Sigma Investment Counselors.
Before you buy a company's shares, you should evaluate the firm's financial state and long-term potential to increase profits. You should decide how much you're willing to spend - and potentially lose - by investing in its efforts. Don't buy a stock merely because of its day-to-day price movements.