Money Myth: When it comes to stocks, it can only go up from here.
Not the case, says Doug Lockwood, principal of Harbor Lights Financial Group. Look no further than examples like Enron, Bear Stearns and Lehman Bros. to show that even stocks trading for a couple bucks can ultimately hit zero. Think long-term and buy quality stocks, not cheap ones. Sometimes things are on sale for good reason. Of course, pay attention to the news so you know when a good company turns bad, but you should never buy something just based on its price alone.
Kevin Timmerman, president and co-owner of Steele Capital Management, says it’s better to invest in mutual funds to avoid this mentality altogether. People become emotionally attached to stocks and will stick with them even when the evidence shows it’s time to cut your losses.