Top Investment Errors to Avoid in 2009

2008 was a bad year for almost anybody who had invested in the securities market. You want to make smart investment decisions that will get you better returns in this new year. Therefore, here are a few investing errors you should to avoid in 2009.

Becoming too attached to your stocks

It's enticing to hold on to your stocks even when logic tells you to sell them. Sometimes you become too attached to stocks because you've spent so much effort studying industry reports and company information until you finally discovered the perfect stock you want to buy. However, keeping stocks just because you are too attached to them can lead to bad investment returns. If there are signals of problems in the company, then be ready to sell your stock even if it hurts

Buying all your stocks all at one time

Another investing mistake to avoid in 2009 is attempting to time the market. If you have $24,000 to invest, for example, you could be better off by following a plan of investing $2,000 each month. In the long run, this will be able to smooth out the markets' ups and downs. By pursuing a plan of investing small amounts of money on a regular schedule, you will avoid the error of investing a large amount of money in a single stock at the wrong time.

Lack of diversification

One basic lesson of investing is to construct a diverse portfolio so that a big loss to a singular stock holding will not knock off your whole portfolio. Putting all of your eggs in a single basket can be a huge mistake.

Exchange traded funds today make the work of diversification very easy. A share of an Exchange traded funds or EFT can track an entire index, such as the Dow Jones, and will give you good diversity.

Dividends

Dividends can act a big part in adding to an investor's total returns. It is crucial to study the financial strength of the company giving the dividend, though, and not to just look at the dividend-yield itself.

Recently, though, there have been many of stocks that offer big dividend yields after large drops in their stock but due to worsening in their businesses, they have decided to reduce the amount of their dividend payments or cut dividends out altogether. This can have a negative effect on a stock that is already in bad shape. So keep some skepticism towards stocks that have seen their dividend yields increase by a large amount recently.

There may be cases that could come up when it will make sense to break one of the above rules. However, these are general errors that you should try to avoid while investing in 2009.