A Million Ways to Die in the Stock Market

May 30, 2014 at 3:24 PM

Seemingly innocent mistakes constantly trip up investors. These errors may not kill investors, but cost some serious money in the process. There’s not enough room here to discuss the million ways investors could have died in the market this year, but here are the top five:

* Going for hot initial public offerings. IPOs are oh-so-tempting to beginning investors. The idea that you’re getting in on the ground floor of the next big thing is alluring. The trouble is, when IPOs are attractively priced those shares go to privileged and large investors first. If you can actually buy a meaningful number of shares of an IPO, you probably don’t want them. Some of the year’s worst-performing IPOs have been spectacular flops. Cancer diagnostics company, Biocept, is the worst performing IPO of the year, falling 56% from its offering price, says IPOscoop.com.

But even investors who jumped into a broad basket of deals at the peak of this year’s IPO mania are paying dearly. The diversified Renaissance IPO exchange-traded fund, which owns recent IPOs, is down 9% from the March 5 peak this year, while the Standard & Poor’s 500 is up 2.5%.

Investors in organic food seller Whole Foods learned this the hard way this year. Shares of the stock tanked 10% before the month of January was even over. That was investors’ chance to get out. Investors who have convinced themselves the stock would “come back,” saw things go from bad to worse. Shares of Whole Foods are now down 34% this year, making it one of the worst stocks in the S&P 500 this year. That means Whole Foods’ shares need to rally 52% before investors break even with where the stock started the year.

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Source: USA Today



Category: Bizblog