If you're an investor and want to build -- not destroy -- your nest egg, then you should avoid doing the following things with your portfolio. In fact, these things are so destructive that we're calling them the seven deadly sins. You've been warned.
1. Trading on Margin
"But if i can borrow at..." Let me stop you right there. I'm sure fortunes have been made using margin, but I suspect many more have been lost. Ask the geniuses who bought master limited partnerships on margin on the theory they could merely pocket the spread between the borrow rate and yield of the MLP and still make money. Spoiler alert! It did not go well.
2. Trading Weekly Options
This lovely investment tool has been brought to us since the financial crisis and my theory is that it's a way for brokers to pocket some cash since they're getting nothing for the deposits at their institutions. Why not juice fees and commissions? I can't blame them. It doesn't mean we need to participate. The next time you run into someone who regularly makes a "killing" trading weekly options, let me know. I'm sure they clean up at Caribbean stud poker at the Bellagio in Las Vegas, too. I can't wait to hear all about it.
3. Trading on an Unrealized Gain/Loss
It's impossible not to know how much you are up and down on a particular stock or investment, but I promise you all of us would be better off not knowing and would make better long-term decisions if we were not concerned with the amount of a gain or loss. Remove this from your screen if you can. At least make yourself work to find it. It's not where a stock has been, it's where it's going after all right?
4. Stepping Outside Your Comfort Zone
My worst trade ever? Vale (VALE) . I lost 50%, in an IRA no less. What's worse, I probably dealt with it with for more than a year. The fancy term for this is "opportunity cost." Whatever, it was a waste of time. Let me now detail for you what I know about iron ore and the Brazilian economy. O.K., I'm done. Let's move on.