What They Don’t Teach You in School

Here are some common investing mistakes given by legendary investor, William O’Neil. These points were published in his 1988 book, How to Make Money in Stocks, but we will show you how they are still relevant 32 years later.

👂 Psst, I have a stock tip for you

Avoid taking stock tips or recommendations… At the very minimum, be skeptical and do your own research. Many investors are willing to risk their hard-earned money on the blind faith of what someone else says. Be prudent, do your research, and understand your investment.

Back to the future… Subreddits, Facebook, and Discourse groups are notorious for recommending stock picks with no basis. You won’t find a shortage of stock recommendations in online forums.

(TAJ: How taking stock picks from online forums ($GNUS) burned investors)

📉 Too cheap to be good

A good way to ensure miserable results is to buy on the way down. Many investors think that a declining stock price shouts discount but in reality, they’re likely declining for a reason. Don’t simply look for companies that are at a record low for the year.

Back to the future… During COVID, many everyday investors bought stocks from companies that filed for Chapter 11 bankruptcy like Hertz ($HTZ) and J.C. Penney ($JCPNQ), thinking they were extremely cheap. They’re not cheap, they’re about to go bankrupt.

💎 Quality over quantity

Investors love to purchase shares that are trading at low prices (i.e. shares under $10) and in a high quantity (i.e. 100 or 1000 stocks at once). Investors should focus on buying quality stocks even if it means only being able to afford a couple shares. One share of a great company is better than 100 shares of a terrible company.

Back to the future… Some of the most valuable companies like Amazon and Facebook are trading for ~$3,100 and ~$250 per share. 

❌ Buying the first name you think of

Investors have a habit of purchasing familiar or household company names. The best investments may be companies you’ve never heard of. Here’s a list of the top-performing stocks from 2009-2019: Netflix, MarketAxess Holdings, Abiomed, TrasnDigm Group, and Broadcom. With the exception of Netflix, how many are you familiar with?

Back to the future… Ford Motor ($F) and General Electric ($GE) are the top two most actively traded stocks on Robinhood. Both of these household names have performed terribly over the past 20 years.

“Get the fundamentals down and the level of everything you do will rise.” – Michael Jordan