Smart people sometimes make dumb mistakes when it comes to investing. Part of the reason for this, I guess, is that most people dont have the time to learn what they need to know to make good decisions. Another reason is that oftentimes when you make a dumb mistake, somebody elsean investment salesperson, for examplemakes money. Fortunately, you can save yourself lots of money and a bunch of headaches by not making bad investment decisions.
Dont Forget to Diversify
The average stock market return is 10 percent or so, but to earn 10 percent you need to own a broad range of stocks. In other words, you need to diversify.
Everybody who thinks about this for more than a few minutes realizes that it is true, but its amazing how many people dont diversify. For example, some people hold huge chunks of their employers stock but little else. Or they own a handful of stocks in the same industry.
To make money on the stock market, you need around 15 to 20 stocks in a variety of industries. (I didnt just make up these figures; the 15 to 20 number comes from a statistical calculation that many upper-division and graduate finance textbooks explain.) With...
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