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Make Mine a Billion: Avoiding the Financial Mistake Avalanche

pic from artemuestra @ Flickr

It’s now drifted into stock market legend, so we’ll probably never know the truth, but here’s the story: Last week, the market suddenly and inexplicably imploded.

It was already a bad day on Wall Street. The Dow was down a couple hundred points on May 7. Without warning, though, the market plummeted nearly 1,000 points.

The reason for the fall–or perhaps the excuse–was that a trader wrote an order to sell a “billion” shares, instead of a “million” shares. The massive loss was the difference between a “b” and a “m.”
Before we get too snide about this bad-typing trader, it’s important to remember we’ve all made financial mistakes that turned into an avalanche.

I know I have.

There’s the mislaid bill that I swore I paid. It turned into late fees and higher interest. While it wasn’t exactly lead to a stock market sell-off, the lingering effect of those high payments lasted for years and cost me hundreds. I picked up a couple of hot stock tips that blew cold while I wasn’t watching.

So, how do you avoid the financial mistake avalanche?

One thing is to automate as many of the routine financial processes as possible. Bill paying is a good place to start. But, you can automate your investments, too.

Another thing is have a fresh set of “eyes” double-check your work. A spouse, family member, or trusted friend can remind you to pay bills and double-check other financial transactions.

Here’s one you might not consider, but it happens. Don’t drink and trade.

My friend came back from an afternoon holiday party and decided to do some trading. Acting on a tip he heard at the party, he bought $35,000 worth of Home Depot stock and went to sleep off his afternoon buzz.

The next day, he realized he had $35,000 worth of General Dynamics stock in his portfolio. How did that get there, he wondered.

A few cups of coffee later, he realized he typed in GD, instead of HD. What was the cost of this transaction?

He actually made $200.

Thus proving that, besides the need to always double-check your financial transactions, even a drunken squirrel will sometimes find a nut.

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  1. May 11th, 2010 at 08:24 | #1

    I was watching CNBC while all that craziness was happening last week. It was absolutely fascinating.

    I am always nervous for a few seconds after submitting a stock trade. My bigger fear over hitting the wrong symbol is hitting the wrong price, even though ETRADE should still get the ‘best price’.

    I too have forgotten the occasional bill and hit with a late fee. I then hate myself for a few hours and move on! :)

  2. May 11th, 2010 at 12:49 | #2

    Hello Everyday Tips.
    I feel better knowing that it’s not just me!

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