Here are 7 ways how not to invest in stocks. If you want to know how to do the stock market, learn here first from my mistakes. I have learned my lessons the hard way and wish I had a top 7 like this 15 years ago.

It is easier to do the right thing, when you first learn what not to do.

Most investments turn sour because of when the investment was made; when and what purchase was done. Few investments in stocks deliver a poor return because of how or when you sold them. Thus your prime lesson here is to buy wisely.

Do the Stock Market... But Not This Way

Here is, in no particular order, my top 7 of how not to invest in stocks:

1. Buy the stocks of the company where you work, even when the industry is not doing great. You may think that you know your company very well. You may know that your company will beat all its competitors. But you could be blind to the fact that the company is operating in an industry with declining revenues and profit margins.
   
   
2. Buy the stocks of a very well-known company that are just costing pennies now. You know this company. For example, you always drove a car of this brand (GM?). Or you always bought their photo cameras and films (Kodak?). And now you could buy their stock on the cheap. Remember that big brands can have huge financial difficulties.
   
   
3. Buy the stocks that are listed in foreign stock markets and in foreign currencies without a solid foreign stock market strategy. Fluctuations in the currency exchange rate could cause you heavy losses if you do not know how to handle them.
   
   
4. Buy stocks when everyone else around you got rich already because they invested in stocks and you didn’t. Greed creeps under your skin. You want a part of the pie as well. But you could be too late to the party and lose your shirt.
   
   
5. Buy well-known mutual funds that invest in stocks without having checked their strategy, cost-level and long-term performance. You may feel save that you have put your hard-earned savings in the hands of a professional fund manager. You just did not know that 80% of the mutual funds underperform the market index.
   
   
6. Buy mutual funds that target a specific “hot” industry without that you understand the valuations and growth potential of the companies in that industry. The internet has a great future. But when you invested all your retirement savings in internet funds in 2000, you probably now have to work till you die.
   
   
7. Buy stocks or funds just because a friend of a friend on a party last night told you so. Or even when it is a close friend who told you so. Do you really know how good all his investments have done the last decade… or do you just think you know?

In our investing guide and other blog posts on this website you can read how I do invest in the stock market, using trend following and index funds.

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What lessons have you learned that you want to add to this top 7 of how not to do the stock market?