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Stock Strategist

Don't Buy These 10 Stocks!

After a huge run, these stocks are a bad bet.

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With the S&P 500 up about 12% and the Nasdaq up more than 23% this year, many investors have decided it's safe to jump back into the pool. Human nature being what it is, the majority of investors naturally will sell stocks when the market is going down, and do the opposite when the market is going up. Although this is a recipe for poor long-term returns, it's also a fact of life.

If we accept the fact that people put more money into the market when they feel "safe," and that they feel safe when stocks are going up, then we can draw another conclusion: Many investors feel safe putting money into high-risk stocks because they tend to rise the fastest when the market bounces. When this happens, the herd mentality feeds on itself, gains beget gains, and the result is a momentum-inspired frenzy of exuberance that lasts until, without warning, the momentum stops and the dumb money is left without a chair.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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