There are plenty of ways to get killed in the stock market, but USA Today
identified five of the top ways that investors have tended to get clobbered the worst in 2014.
Initial public offerings (IPOs) are alluring, but probably not the best idea, according to the newspaper. Some of them, like Biocept, which has fallen 56 percent since it started trading this year, have been spectacular losers in 2014.
"The trouble is, when IPOs are attractively priced those shares go to privileged and large investors first. If you can actually buy a meaningful number of shares of an IPO, you probably don't want them."
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Another big mistake investors make is to let their losers ride — and ride, and ride lower. Many professionals recommend selling a stock if it goes down 10 percent from the buyer's purchase price.
A case in point this year, according to USA Today, is Whole Food, which is already down more than 34 percent in 2014. "That means Whole Foods' shares need to rally 52 percent before investors break even with there the stock started the year."
Many investors in 2014 have lost out when trying to guess the direction of interest rates. They listened to the pundits and convinced themselves interest rates had to jump in 2014, which would ravage bonds. But those who bailed have watched bond investments go up smartly instead.
Then there is the mistake of following the crowd into "hot stocks."
"Social media stocks could do no wrong in 2013. But investors that jumped into the likes of LinkedIn, Twitter and Angie's List this year have been pounded this year. Just about all these social media darlings have been wealth crushers this year," USA Today noted.
Twitter is down 50 percent in 2014, while Angie's list is off 35 percent and LinkedIn is down about 28 percent as of Monday's close.
Chasing last year's top stock sectors has also been a loser in 2014.
USA Today noted consumer discretionary stocks leapt 41 percent last year, but trail the other major sectors in 2014, with a 1.8 percent loss. Other sectors that were strong last year but that are weak in 2014 are industrials and financials.
To protect themselves in the high-flying stock market of 2014, in which the S&P 500 has already hit 14 new highs, investors should emphasize fundamentals, Fortune
"The best strategy is to load up on cheap, reviled stocks and dump the super-expensive high-flyers that are largely responsible for the market's elastic valuation," Fortune said.
When stocks rise even as volume and breadth start to ebb, it's sometimes a sign stocks are top-heavy and headed for a fall.
"Breadth is suggesting that the market is topping," Hayes Miller, an investment pro at Baring Asset Management, told Bloomberg
. "This is not a good starting point for buying equities at this price. We all know that investors are induced into risk assets by central bank policies, which keep your safer options very unattractive.
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