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'7 deadly stocks' cost you 85% in 7 months

We've all been warned of the perils of the seven deadly sins. Fair enough. But investors might not realize just how much pain was paid owning the year's "seven deadly stocks" — at the wrong time.

Had you bought the worst stock in the Standard & Poor's of each month this year, including Best Buy in January, Netflix in March and Coach in June, and sold at the end of the month, you would have racked up a cumulative 85% loss so far, according to a USA TODAY analysis of data from S&P Capital IQ.

Terrance Emerson | iStock | Getty Images

Clearly (and thankfully), few if any investors are this unlucky for this long. Phew. And most investors know to diversify to help prevent such a series of unfortunate events. But this whopping accumulated loss is a reminder of the dangers of picking the wrong stocks – and not having an exit strategy – even while the market appears to be deceivingly tranquil.

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The brutal series of trades would have started with consumer electronics retailer Best Buy, which declined 41% in January. That was the biggest monthly loss of any of the monthly losers so far this year. Shares have been trying to claw their way back this year, but are still down 21% in 2014, falling well short of the S&P 500's gain. The stock hasn't bounced back even though the retailer reported an adjusted profit of 20 cents a share in the quarter ended April 30, beating estimates by 65%.

February's worst stock was energy firm ONEOK, with a 13.7% loss. It's important to note that ONEOK in February split off its natural gas distribution business into a public company called ONE Gas. ONEOK investors kept their shares, but received a share of ONE Gas for every share of ONEOK they owned, which explains the big drop in ONEOK shares. Plus there's little consolation: The next biggest declining stock for February after ONEOK was Cabot Oil & Gas, which didn't do much better by falling 12.5% in the month.

Then in March, video streamer Netflix dropped 21%. And in April, robot surgery company Intuitive Surgical (ISRG) dropped 17.4%. Lender Navient fell 38.6% in May and in June handbag maker Coach dropped 16%. And so far in the month of July, energy firm NRG is down 14.3%.

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Add it all up, and owning the worst stock for each month for seven months this year would have spelled an 85% loss. In dollar terms, that means a $10,000 initial investment would be shredded to roughly $1,500. Ouch.

It can be fairly pointed out that for long-term investors, such short-term moves aren't all that meaningful. Four of the seven deadly monthly stocks are actually up for the year. Intuitive Surgical, despite the brutal April, is up 21% this year. And many professional traders know to cut their losses once they hit 10% or more of what they paid. How many investors could have endured the April beat-down and not bailed out?

And while Intuitive Surgical is still up for the year, let's not forget about the stocks that have never recovered from their bad month. Coach stock has been suffering all year, not to mention the painful June, and is down 33% in 2014 so far.

Picking individual stocks can be tricky, academics warn us all the time. But this year has been a brutal reminder, yet again, that betting on the wrong stocks at the wrong time can cause some serious pain. And it's a big-time reason why many investors over time, studies show, do best by simply buying and holding a broad market index.

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Below are the worst S&P 500 stocks for each month of the year so far, including how the stocks are faring year-to-date:

Month Worst stock Symbol % Ch. in month YTD % Ch.
January Best Buy BBY -41% -22%
February ONEOK OKE -13.70% 8.20%
March Netflix NFLX -21% 15.10%
April Intuitive Surgical ISRG -17.40% 21.30%
May Navient NAVI -38.60% -33%
June Coach COH -16% -38%
July NRG NRG -14.30% 11%
Source: S&P Capital IQ, USA Today research

—By Matt Krantz, USA Today

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