The Online Investing AI Blog

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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?

Read more…

Accelerating Technology, Automated Trading, Investing, Money, Online Investing AI, US Economy automate, billion, bills, million, mistakes, sell-off, stock market, stocks, trading

What’s the one thing that’s free, found in ready abundance, doesn’t need to be mined or manufactured, and is happily lent and offered?

An opinion.

Opinions are omnipresent for traders. You can check out CNBC and Fox Business. You can read the Investor’s Business Daily or check out the Wall Street Journal.

Then there’s blogs… I write that hypocritically.

Being connected to so much information and opinion is a good thing, right? It’s part of the whole Singularity where everything will be composed of information, right?

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Internet, Investing, Money, Online Investing AI abundance, CNBC, finance, Investing, Investor's Business Daily, mistakes, Money, opinions, talking heads, traders, trading, Wall Street Journal, wealth

Did you know that Warren Buffett, currently worth $37 billion, lives in the same house he bought 50 years ago for $40,000? Or that Jeff Bezos, also one of the richest men in the world, drives a Honda Accord? Why would someone who can live in any kind of house, and drive any car, be so average? Could successful investing be linked to frugal spending habits?

What is the one habit that can undermine even the most successful investor?

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Investing, Money, Success financial future, Investing, jeff bezos, mistakes, Money, Success, Warren Buffett

People wonder how trillions of dollars can plummet from the stock market in a few months.

Other people wonder where their life savings vanished to.

How could professional money managers lose money?

I want you to watch this video:

The Triple That Never Was

Here’s Ryan Church, of the Mets, a professional baseball player and by all accounts a great player. He hit a triple. And he missed third base! It cost the Mets the game. (If there are any Mets fans out there, I feel your pain. I’m a Pirates fan.)

Maybe he was so happy to hit the potential game winner that he missed the bag. Maybe he grew fearful that he wouldn’t make it home. Maybe he just had a mental error.

So, how does a professional lose money?

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Accelerating Technology, Automated Trading, Investing, Money, Online Investing AI, Success baseball, crash, mental errors, mistakes, technology, trading

As people gain investing experience, they will have some wins and some losses. If they are buying stocks, they will have some trades that made money and others that lost money. If they bought real estate, they have some properties that are profitable and problem-free, and others that have little cash flow but provide an endless supply of headaches and problems.

Once people have some wins on their record they tend to do something very strange. Often they choose not to do what has worked for them in the past. Sound crazy? It is. But it is also part of human nature. We tend to get bored easily, and doing the same thing over and over, eating the same food each meal, and cooking the same recipe each day is a great way to become incredibly bored. So, people like to experiment and try new ideas and strategies.

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Business Strategy, Investing, Money, Success do what works, Investing, mistakes, Money, real estate, stocks, Success

Whenever we start a new project or course of action, it is important that the people who are closest to us understand and accept what we are doing. In fact, it’s best if they are so enthusiastic that they actually help us make the project succeed. This is true for many aspects of life, and it is especially true for investing.

The #1 reason that couples fight and get divorced is because they have major disagreements about money. And, if one spouse buys into an investment and the other spouse feels that it is too risky (which is usually the case), then the whole family is going to have serious problems. If the investment does not work out and the family loses money, the situation could become worse still.

How do we solve this major potential problem, before it occurs?

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Investing, Money, Success accepting risk, buy-in, children, Investing, mistakes, Money, risk, spouse

If you ask people about improving their financial situation, they usually say something like,

I wish I had a little more money.

Have you ever heard anyone say this? They think their financial goal is “a little more money.” But this is not a goal at all. This is just an impotent wish.

Wishes and hopes and desires are faint yearnings that come and go like a breeze. We feel like we want something, and then we never seem to get it. Goals are made of very special and different stuff. Goals are something that we are certain about. Goals have a specific number that we attach to them. Goals create a concrete crystal clear vision inside our mind. When we have a goal defined with precision, we can think of specific steps that we will take to achieve it.

How does this apply to money?

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Investing, Money, Success goals, Investing, lawyers, mistakes, Money, retirement, wage slaves

When people start investing, they typically have no idea about what they are doing. Some people lose money at the beginning, and others make money right away. Making money is very encouraging, but it can also be a problem.

New investors typically have no idea how to measure the risk of an investment (see Top Investing Mistake #5). When they make money right from the start, it is easy to conclude that there is no risk. And so they start making large investments that can cause massive losses. They think that they can’t lose, so they start trading their entire account on a single stock or option.

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Investing, Success beginner, going big, Investing, leverage, mistakes, risk

Some people just love to try things, and don’t need a lot of information before getting started. This can happen to people who just start out investing. They want to see what happens, and like to learn by experience.

There are a few problems with this approach. What can sometimes happen is that people lose so much money so quickly that they decide that “investing is too risky”. They become traumatized from their losses, and never invest again. All investors make money at times and lose money other times. It’s part of the investing game. The challenge is that if people lose a lot of money at the beginning, they might choose to never invest again.

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Investing, Success books, experience, information, Investing, mistakes, Money, stocks

Many people are absolutely terrified of taking any risks. They stay in a job that they hate, settle for relationships that don’t fulfill them, and take the same route to work each day. It’s easy to become a creature of habit. And it’s very safe.

This kind of thinking does not work when it comes to investing. There is always risk involved in any investment. Even putting money in the bank is risky. The bank can default. They can just steal your money and say that your balance is zero or your account doesn’t exist. And, besides that, there is the reality of inflation. People think money in the bank is risk-free, but I am not sure if that is really true.

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Investing, Money, Success analysis, fear, information, Investing, mistakes, Money, paralysis, risk