5 Ways to Lose Your Money in the Market: Josh Brown

Paul Simon may have had "5o Ways To Leave Your Lover" but when it comes to avoiding landmines on Wall Street, blogger/advisor Josh Brown has put out a list of mistakes that are surefire money losers that you don't need to make, "since he has made almost all of them" himself already. They're moves he describes as being destined to lose before you even embark. Brown stopped by to discuss the top 5 money losers.

(1) Holding the top spot on the list is: Buying Out of the Money, Naked Options. Brown says, unless you are an "elite, professional trader" you have no business trying to move money from the pits of the CME to your account, especially since the vast majority of contracts expire worthless.

(2) Another certain money-loser, and a particularly timely one is the mistake of allowing your politics to cloud your financial judgment. "This is the (mistake) that I see more people do than almost anything else," Brown says. "It is a guaranteed money-loser."

I would also argue that it is probably one of the most difficult rules to follow given how Washington-centric and policy driven our markets and economy have become, but agree the with basic premise that political approval/disapproval doesn't correlate with gains/losses in the market.

(3) A third costly trap is the ''gut trader" or what most people might call, talking heads. "You need to recognize that you're not listening to an expert on a stock per se," Brown says, adding that it's probably just someone who read something, has excellent recall, and and is good at spitting it out. Following the generic ideas of other people is a money-loser.

(4) Brown also offers caution on following the generic timing advice of other people that is not suited to your particular needs and objectives. "Stay away from any of this wild stuff because truthfully, most of the game is just staying with it," Brown cautions. The time frame trap is particularly dangerous in the era of 24-hour media, where live broadcasts, blogs, tweets and other updates can occur in the blink of an eye, and the guru who you thought you were following, may have just changed their mind unbeknown to you. "They're not going to text message you and say, 'time to come out.'"

(5) And finally, don't always look to swim against the tide or to zig when the market zags. "Knee-jerk contrarianism" is a money-loser because most of the time "people are better off in the herd," Brown says. "Only at major turning points" does it pay to be contrarian. Simply taking the opposite side on every investment decision because you consider yourself a contrarian is a money-loser.

There are other tricks and traps to avoid, but if you were to apply a single overlay to the Brown's general premise on this topic it might be to do your own thinking, set your own plans, and avoid anything that you don't understand.