Tag Archives: Five rules for successful stock investing

Seven stock investing mistakes to avoid: Pat Dorsey

It takes many great stock picks to make up for just a few big errors, says Pat Dorsey, author of The Five Rules for Successful Stock Investing. So even before one goes into any analysis process, care should be taken to avoid seven easily avoidable mistakes.
Here is Pat Dorsey’s list of seven mistakes to avoid:
1. Swinging for the fences.
2. Believing that it is different this time.
3. Falling in love with products.
4. Panicking when the market is down.
5. Trying to time the market.
6. Ignoring valuation.
7. Relying on earnings for the whole story.

Buying a stock: do your homework

“One person’s hot growth stock is another’s disaster waiting to happen,” said Pat Dorsey, author of “The Five Rules For Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market”.

“For one thing, you’re putting your money at risk, so you should know what you’re buying,” Pat Dorsey said. His advice? “…you can’t just take some one’s word that a company is an attractive investment.”

In other words, you must “Do Your Homework”. This is Pat Dorsey’s first recommended rule. This means, according to Pat Dorsey, “sitting down and reading the annual report cover to cover, checking out industry competitors and going through past financial statements.”

Pat Dorsey’s other recommended rules are: find economic moats, have a margin of safety, hold for the long haul, and know when to sell.

Recommended reading:

The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market