# 10 Dont think approach is more important than reality

This mistake must be avoided not only in post-recession planning but anytime, says Nicolae Ghergus, managing director at Confident Invest.

“The fact that second-string elements on a scale of micro to macro influences, turn positive in case of a company, doesn’t mean that as long as management’s approach to market and economy doesn’t change, it will have an impact on the share price”, said the manager of Confident.

He gives the example of Dinu Patriciu who became a magnet of mistrust due to his neutral approach to the future performance of the market or local investors’ great indignation over Standard&Poor’s and Fitch’s country rating-cutting actions on major economic imbalances and sharp decline in international capital flow.

#9 Dont take an idealistic approach to crisis

Expecting the crisis to last forever is as dangerous as refusing to accept its imminence. No one could predict the crisis from its very onset or its magnitude. Neither speculators nor valuators.

The pessimists saw it coming but what they couldn’t see was its magnitude. Optimists didn’t believe in it, but acknowledged its violence and took precaution.

“That is when economies spring back to life, optimists tend to act first, but they are also the ones to take out their money at the first wisp of cloud, while pessimists don’t rush into buying stocks or investing at the first snowdrop signaling the first stirring of economic spring”, said Nicolae Ghergus.

#8 Dont take a distant twist

If you see your lifetime savings going down the drain, don’t surrender and expect the market to hark back to hefty growth rates, and hope your investments will burst into bloom by itself.

Gabriel Aldea, broker at Intercapital firm, says crisis-hit investors don’t have the ability to identify the opportunities to recover losses and restructure its portfolio so as to optimize return.


#7 Dont rely on the markets capacity to rebound

Ghergus says it is very unlikely markets will hark back to pre-crisis hefty growth, for the simple reason that the record values before the crisis didn’t reflect the real value of the stocks. The crisis has also been a mean to straighten out prices. The road to pre-crisis highs will be blocked until prices’ fundamentals will accurately reflect their values.

You don’t invest in history but in reality, Gabriel Necuta, broker at Prime Transaction says. Economic indicators of companies must echo the current economic conditions and present attractiveness in this market environment, and not of that of few years ago.

“Any investment must rely on the fundamental arguments of a company, rather than immediate reaction of the market”, Necula pointed out.

#6 Dont get emotional about your investments

Emotions and stock investing don’t mix. Nothing good can come out of panic selling or enthusiastic buying.

“You must avoid acting on extremes, and not fall into the trap of being too pessimistic or too optimistic. Fear and greed must never drive investment decisions. Acting rationally will always lead to profits”, says Gabriel Necula.


#5 Dont invest on your own without knowing the market

Investing at the stock market requires at least a basic knowledge, and if time doesn’t allow you to stay up to date with the market’s movements, it is better to contact a broker rather than relying on your intuition.

“Some investors decide to take it on their own, even if they don’t have enough experience or if there is no clear relation between him and the broker, or if the investor prefers not to pay for advisory services”, says Gabriel Necula.

#4. Dont put your eggs in one basket

Any investment must be diversified, and it is not recommended to put all your money in just one stock. You have to choose sectors that are attractive and fit to the risk profile of any investor, says Necula.

A very cautious basket can minimize profits. “Some investors put their bets on defensive stocks even when the market is growing, although a stock portfolio should normally focus on dynamic companies”, says Gabriel Aldea.

#3 Dont trade on tips or news

Don’t invest relying solely on tips offered for free by the “benevolent”. This doesn’t mean that tips are not good, but most of the times it leads to failures.

Investors must not be influenced by the bad news piling up from the real economy and expecting the market to plummet or go back to crisis' troughs.

“In this situation, investors forget that the stock market is the barometer of the economy, as it heralds its future performance”, Gabriel Aldea says.

#2 Dont take a Buy and Hold approach

Buy and Hold approach is not the ‘latest thing’ any longer, given the recent changes in the global economy, says the Prime Transaction analyst. A discipline and consistent strategy can help investors reap profits and avoid losses.

The pre-crisis macroeconomic theories don’t apply anymore in the current landscape, because any major crisis causes drastic changes in investors’ mindset and in market regulations, permanent downtrends, and reorientation of strategies.

#1 Dont think that stock market is an Eldorado

Investing in stocks incurs risks investors must take. In the pre-crisis era, everybody believed that the stock market is an Eldorado, but the last two years have shown exactly the opposite.

New investors think returns can be easy to achieve. “Short-term returns creates the impression that profits are easy to make, and thus increase investments, without taking into account the possibility of loosing alike”.