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When I joined TMF, I read the website, newsletters, and message boards like I should have been doing my job. And yet, I have made mistakes that I am still recovering from today. I don’t blame the content, it’s just that my retention was highly selective. So, learn from my mistakes and don’t ever do these two things.

1) Don't Price Anchor: If a company sells for $120 one day and $75 a month later, is it a "value"? No! At least not because of the stock price - the historical stock prices should have little if any impact in your decision to invest. Train yourself to look at market cap, revenue, net income, profit margins, management, future prospects, and on and on. “Falling Knives” are extremely tempting because of price anchoring. You start telling yourself, when it comes back, I’ll have a double! Whoa, when a stock plunges there is usually a good reason for it. Wall Street and Mr. Market are highly criticized on, however, don’t become arrogant and start thinking that everybody else out there is an idiot. Often when a stock falls, there is a good reason for it and caution is always required. In my opinion, the market does overreact on the high and low side, but it is still often right. Focus on the business, not the price. This will allow you to pick out the companies that continue to perform AND drop in price…

2) There is no sure thing: I don't care how many times Tom or Dave have recommended a stock or how many people on the message boards are screaming how cheap it is, always read and evaluate critically. Never become obsessed with a stock – there are always great ideas out there, don’t risk your money on just a couple. FMD was picked in two TMF newsletters, had a huge message board following, and was worshiped by one of the most respected bank analysts out there (Tom Brown). FMD was in my mind a sure thing and I got dizzy with how much my investment was going to grow, giddy to add more shares when I got new funds…but nobody could have predicted what has happened in the financial markets and FMD is down 90%. There is no sure thing – it is always a mistake to invest without acknowledging uncertainty.

I’d love to hear about any other lessons learned about investing in stocks, personal finance, starting a business, career, etc. I think that could be a real value of this board…if we are all getting started, figuring things out, and making mistakes, we can learn from those who have already committed them. And, unlike advice from those retired folks on the other boards, I’d actually follow advice from fellow young professionals :)

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When Life Gives You Lemons
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