Want To Avoid Losing Money In Stocks? Do These 3 Things | The Motley Fool Singapore

Want To Avoid Losing Money In Stocks? Do These 3 Things | The Motley Fool Singapore: "1. Avoid short-term stock market forecasts

It’s tempting to listen to the views of highly-paid and well-respected finance professionals on the stock market’s short-term future and then invest accordingly. But, it’s worth noting how horrible their collective track-records are.

Financial institutions (think banks and investment firms) on Wall Street, the Capital of finance in the U.S., have people who work as “market strategists.” These guys (and gals) are well-read, highly educated, very well-compensated – and very wrong at times."

2. Be careful with highly-valued shares



Shares with expensive-looking valuation metrics are not always bad investments. But, it pays to at least be careful with a stock that is very highly-valued.



Near the end of May this year, Jason Holdings Limited (SGX: 5I3), a company that provides timber flooring services, was trading at S$0.64 and being valued at 330 times its trailing earnings and 9.4 times its book value.



At that time, the market – as represented by the SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the fundamentals of the market barometer, the Straits Times Index (SGX: ^STI) – had a price-to-earnings (PE) ratio of just 14.



Today, Jason Holdings’ shares are exchanging hands at S$0.073 each, some 88% lower than the price of S$0.64.



3. Pay close attention to companies with high-debt



Debt can be used in a smart manner by companies to create value for shareholders. But, debt can also be a source of big trouble, especially when companies start piling it on.



The late Walter Schloss, who is an investor with a great long-term track record, once wisely said: “I don’t like debt because it can really get a company into trouble.” It’s such a simple yet powerful statement.



Fishmeal producer China Fishery Group Ltd (SGX: B0Z) is a vivid example of the potential destructiveness of debt. As you can see in the chart below, the company has been heavily-leveraged (as alluded to by the high net-debt position) for many years

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