5 Dumb Things Investors Say... Repeatedly

NEW YORK ( TheStreet) -- Fellow TheStreet contributor Richard Saintvilus knows I love him. That's why I can refer to something he says as "dumb" without fear of violence.

I hope that you -- yes you -- feel the same way. Like we're in a bar talking trash about sports, the opposite sex and money. No matter what, we leave it all on the ice.

With that, Saintvilus kicks off my list of five dumb things that investors incessantly repeat.

1. "So-and-so should buy so-and-so."

I am a recovering buyout-rumor-aholic. That makes me want to stage an intervention when I see somebody I care about go down a similar path.

During the month of August, Saintvilus suggested that Dell ( DELL) or Facebook ( FB) should buy Research in Motion ( RIMM).

In Dell Should Buy RIM or Die and Why Now is the Time for Facebook to Buy RIM, Saintvilus offers similar reasons why Dell or Facebook should scrape RIM's dead and cold corpse off of a Canadian curbside. Simply put, he thinks RIM could give these companies the mobile presence (Dell) or push (Facebook) they apparently need.

Just because something is cheap doesn't make it inexpensive. One hurting company -- Dell more so than Facebook -- plus another hurting company does not equal a resurgence. It equals two hurting companies.

A more-than-logical strategic connection between companies must exist to keep M&A speculation sane. Generally speaking, it makes more sense to speculate about two strong companies hooking up than it does one strong and one weak or two weak.

For example, I expect Viacom ( VIAB) to search for M&A. It makes sense for another media conglomerate to listen. Disney ( DIS) or Time Warner ( TWX) could fill Viacom's holes, such as an absence of sports programming, while Viacom compliments Disney's existing kid properties or Time Warner's male-skewing properties.

2. "I'm going to all cash."

Here's what bugs me: Unless you are my grandfather's age, stop sounding like my grandfather. There's one reason, maybe two, for going all cash.

One, you need some money within the next two years -- or possibly five to seven years if retirement is approaching -- and, two, being in stocks fuels an unhealthy amount of anxiety.

Investors often react to the crisis of the day by taking an overly defensive stance. We've all been around long enough to realize the sky's always falling. Don't let overhyped hysteria derail your goals.

3. "I'm going to start daytrading."

I hear this all of the time. It's a standard line that goes something like: "I love investing. I spend my spare time looking at my portfolio. I think I am going to trade full time. It only makes sense."

No, it makes absolutely no sense.

Fellow TheStreet contributor Robert Weinstein is a successful daytrader and long-term investor. He hosts a live trader chatroom. When I daytraded, I spent most of my days in that room.

I soon realized that daytrading would never work for me. I did alright, but it took a ton of effort and way too much stress to eek out what was really only a modest profit. People come and go from that chatroom like crazy. I recognize less than a handful of names from the first day I visited more than two years ago.

You love to play baseball. And you're pretty good at it. There's no way, however, you could make a living doing it at a high level. A similar dynamic applies to the distinction between investing and daytrading.

Plenty of people can develop and stick to a long-term plan that drives mid- and long-range goals, such as buying a home, sending kids to college and saving for retirement. Being able to do that does not translate into daytrading ability.

Daytraders have a plan that must work on a consistent basis. For many, there's no room for an off-month, let alone an off-year.

Daytraders spend years developing systems of indicators that essentially remove all emotion from the process. Tickers represent nothing more than numbers that, based on good signals, should act predictably in a given situation. Develop an edge and manage wins and losses properly, and you're good to go. You're also part of the less than 1% that can actually do it.

4. "Options are too risky for me."

This might be the statement that stings the most. It has become accepted as indisputable fact by many investors. But really, it's like claiming that dividends are dangerous.

Like daytrading, most folks should never dabble in advanced options. If it has more than two legs and a fancy name, proceed with extreme caution. But, there's no reason why every investor on Earth with 100 shares or more of an optionable stock should not be writing covered calls.

When you use covered calls, you assume a modicum of additional risk if the stock you own decreases in value. It depends on the extent and timing of the decline. But it's not enough risk to keep even the most skittish investor away from the best example of "free" money the stock market offers, aside from dividends.

5. "You sold Apple (AAPL) too soon."

I love this one. It's not just AAPL. You could say the same about a whole host of other stocks investors have sold "too soon."

A gain is a gain. Leaving money on the table means you're making money. I would much rather go the disciplined route and take profits -- even if I end up missing out on way more upside. Sticking to that philosophy ends well more often than not.

Add up the losses or barely breakevens on stocks that you got greedy with, only to watch them fall. Times two for the ones you got emotional about and stubbornly held on to all the way down to far south of breakeven. Those experiences -- which can crush a portfolio -- more than offset regret over the ones that got away.

At the time of publication, the author was long FB. He was also long VIAB in a custodial account he manages for his minor child.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Rocco Pendola is a private investor with nearly 20 years experience in various forms of media, ranging from radio to print. His work has appeared in academic journals as well as dozens of online and offline publications. He uses his broad experience to help inform his coverage of the stock market, primarily in the technology, Internet and new media spaces. He has taken a long-term approach to investing, focusing on dividend-paying stocks, since he opened his first account as a teenager. Pendola, 37, is based in Santa Monica, Calif., where he lives with his wife and child.

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