Investment Mistakes to Avoid

• Swinging for the fences. It is important to buy good solid companies with strong financials and economic moat. Loading up your portfolio with risky, all-or-nothing stocks - is a sure way to investment disaster. Remember, a share that drops 50 percent needs to double just to break even.
• Believing that it's different this time. The four most expensive words on Wall Street are "It's different this time". History does tend to repeat itself, bubbles do burst and economies go in cycles. Not knowing market history is a major handicap. But also remember not to fully rely on historical data and ignoring fundamentals all together.
• Falling in love with products. You cannot buy company's shares just because you think the products are very attractive and innovative. Always look at financials and history of the company. Take Northern Rock for example, there were many people who really liked their mortgage deals and would recommend them to friends, but unfortunately, the company itself didn't perform that well as when the credit crunch came they were totally unprepared and could not raise enough finances to survive. 2007/2008 were the worst years for the company and British government had to bail them our, the stock plunged for than 90 percent within months.
• Panicking when the market is down. Shares are generally more attractive when no one else wants to buy them. Going against the herd takes courage, but that courage pays off. You will do better as an investor if you think for yourself and seek out bargains in parts of the market that everyone else has forsaken, rather than buying the flavour of the month in the financial press.
• Trying to time the market. Market timing is one of the all-time great myths of investing. There is no strategy that consistently tells you when to be in the market and when to be out of it, and anyone who says otherwise usually has a market-timing service to sell you. Technical analysis can be used to analysis of potential entrance and exit points but it' just potential and results are not 100% accurate.
• Ignoring valuations. The only reason you should ever buy a stock is that you think the business is worth more than it's selling for - not because you think a greater fool will pay more for the shares a few months later.
• Relying only on the earnings. At the end of the day, cash flow is what matters, not earnings. For a host of reasons, accounting-based earnings per share can be made just about whatever a company's management wants them to, but cash flow is much harder to fiddle with. The statement of cash flows can yield an insight into the true health of a business, and you can stop a lot of blowups before they happen by simply watching the trend of operating cash flow relative to earnings.