The 5 don'ts of investing

​"Don't" may be just the word that will save you from making a costly mistake. Scott Phillips from the Motley Fool joined me with some of his favourite don'ts.

• Don't trade too often.
• Don't sell too quickly.
• Don't give in to envy or greed.
• Don't buy the hot new thing.
• Don't let the 'story' overwhelm the fundamentals.

Here's a link to the original episode and blog post

Don't trade too often

"It's so easy to get caught up with the media and frankly, the brokerage ads and, you know, the take a position type ads, or we should do this, do that, you know, trade in, trade out there. There's very much a sense that if you can be active, you will do well. In my experience in most people's experience is exactly the opposite. If you keep your brokerage and your taxes down, you find good businesses and let them do their thing. That tends to be where success comes from. My biggest mistakes have been actually things like selling too early, rather than selling too late or selling too frequently. And so that idea of just be sensible, be slow. I tend to like to say, buy slow and sell even slower. In other words, take your time to buy or sell more slowly."

Don't sell too quickly

"Domino's is a great example. We recommend Domino's for our members. I think that was about $6. Give or take. It went to $12 ish. Double the money for members felt like genius. Lets get out. Of course the shares went from $12 up to $80 something. I think a lot about that now. I left a seven fold return on the table being too greedy and too quick to sell because I kinda thought, well maybe most of it's done. There's an old saying, you don't go broke taking a profit. That's true. You also don't make a lot of money if you take profits too quickly. And so look, I've made so many mistakes invest in buying the wrong companies, but frankly, if I'd kept every company I bought, including Domino's and others, I sold too quickly. I'll be far, far better off even holding those dogs rather than selling too quickly, the dogs and the good stuff and ruining the missed opportunities."

Don't give in to envy or greed

"It's the basics of getting your head right, buy a good business and hold for the long term. That stuff doesn't require a huge IQ. If you can just get your behavioural components right. When it comes to greed and envy, just because your brother-in-law has made some money on a stock doesn't mean you should chase it up. It's the tortoise and the hare. There is a reason this fable is a cliche thousands of years later. Just because someone else is making some money is not a reason to invest."

Don't buy the hot new thing & don't let the story overwhelm the fundamentals

"Don't buy the cool, sexy, popular thing that everyone's talking about. Make sure, you know, there's a fundamental underpinning. And when we say fundamentals in investing, we're talking about things like sales and profits. Those things are actually do matter for businesses that help you work out. Okay. There's a story. Am I seeing evidence of that story is actually turning into real value for shareholders and that's when the fundamentals start to come into play. If you get both, but that's a really good theme by the way, because if the story is real, that you have got something, but the story alone just can't get your cross the line."

And finally

"I have a really, really high conviction that adding regularly to a quality portfolio of stocks is the best way I know how to get rich over a very long term."

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