The year 2011 is almost over: a lot of money has been made, and a lot of money has been lost in this year, and, more importantly, a lot of lessons were learned by the stock traders during this year. So what are these lessons?In order of no importance, here are the top 20 lessons that stock traders learned in 2011:

1. They learned that investing in bank stocks was the worst thing that happened to them in 2011.
2. They learned that buying shares in social networks, such as LinkedIn and Groupon, is the second worst investment.
3. They learned that stocks with a very high P/E ratio such as AMZN, NFLX, and the likes are really overvalued.
4. They learned that when oil goes up, it will go down, and a magical hand is ensuring that oil doesn’t go below $80, and doesn’t go above $110.
5. They learned that investing in companies with no future, such as Canadian RIM, is a terrible idea.
6. They learned that the USD remains the world’s reserve (and best) currency, and they learned that any other currency should not be trusted (all of the other currencies are valued in USD after all), and that the end of the Euro is nigh…
7. They learned that what happened to the US will now happen to Europe, but probably in a messier way.
8. They learned that they should trust traditional companies that have real value and that can sustain their presence for many decades to come. One good example of these companies is McDonald’s (just check MCD’s graph below).

   

   Figure 1: MCD Year to Date: Mc Donald’s stock has gone up 25% since the beginning of the year (Image courtesy of Google Finance)
9. They learned that IPOs are there to sucker them. GM is a great example!
10. They learned that bank interest rates nowadays are only a fraction of the inflation rate, which means that putting money in the banks is synonymous to losing money.
11. They learned that real estate investment was only good while it lasted, and that they now need to move to something else.
12. They learned to stay away from Chinese stocks and to fear them. There is a lot of question marks when it comes to each and every Chinese stock (remember DANG and YOKU?).
13. They learned that gold can be treacherous. Gold can go up $50 one day and then go down $70 the next day.
14. They learned not to trust most of the economies in Europe, and not to trust the leaders of European countries when it comes to economical reforms (it should be obvious for any investor that all these economical reforms (read austerity measures) will backfire on each and every country that has adopted them, as these countries seem that they have forgotten one important factor: their people).
15. They learned not to put all their eggs in one basket (that’s a lesson learned the hard way especially for those who solely invested in bank stocks).
16. They learned that patience is a virtue, especially when it comes to investing in solid companies with very large cash reserves such as Apple, Google, and CSCO.
17. They learned that contrarian investing is alive and kicking! The moment everyone is pessimistic and the whole mood is gloomy and everyone is recommending to sell, stocks start to suddenly go up.
18. They learned to put their ego aside and accept loss as part of the game, because if you don’t lose from time to time, you can’t win in the stock market.
19. They learned that trading with indexes (such as SPY) is much more predictable than trading with stocks.
20. They learned that trading with commodities is much more predictable (and safer) than trading with stocks and indexes.

Are you a stock trader? Do you have any lessons learned that you would like to share? If yes, then please feel free to comment below!

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.