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TheStreet Open House

Is There a Sucker In You?: Wall Street's Rules, Part 3

NEW YORK (TheStreet) -- In the first part of this series we talked about the importance of making your investment decisions more about the bottom line and less about perpetuating the "rules of investing" or sometimes the unspoken myths that serves to only qualify your status as an investor while yielding very little results.

In the the second part we looked at the myths surrounding portfolio diversification.

In this article we are going to focus on investor psychology and how a trained mind can look for not only ways to profit, but equally important, not being a Wall Street sucker.

Don't Talk to Strangers

Wall Street reminds me sometimes of that sleazy guy in the old Volkswagen van driving around neighborhoods looking to handout lollipops. As adults you would think we'd know what his intentions are. However, those who are always quick to approach the van with eyes gleaming carrying high expectations often have no clue.

While careful due diligence will remind me not to talk to strangers, not everyone appreciates a bearish sentiment. The term these days is "basher." Look up the word and you will likely see my name next to it.

Be that as it may, I speak with these types of investors on a daily basis and it is often sad to hear the stories they share once they were finally allowed to exit the van. As you try to convince them that the lollipop wasn't worth it, they are off looking for the next van.

Which reminds me of one of the things making Wall Street appear scarier than it really is -- Facebook's (FB) initial public offering gaffe.

Another example is Research in Motion (RIMM), where although it has lost 95% of its value over the past three years (-51% this year alone), its management continues to insist there is nothing wrong with the company.

But in RIM's case, this leads me to one of the most important rules of investing: Don't' try to catch a falling knife because you just end up getting hurt.

The question is, why has it taken this long for the sell recommendations on RIM by analysts to start coming in? The stock has been in a free-fall for the past couple of years and the company has shown very little interest in making capital investments to compete against APPL (AAPL) and Google (GOOG) in any meaningful way.

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