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Lessons learned from the current financial crisis

Everyone makes mistakes...but really smart people learn from their own mistakes and those that other people make. What are the lessons from the current crisis that one can learn from.

1. Don't be unrealistically optimistic: Markets can come down as well – don't believe the cheerleaders who only give you the positive picture of markets going up. Be very suspicious of the so-called experts on TV who are "confident" that a stock or the market will go up. If they are such geniuses, why did they not warn you 10 months ago that the market would go down by about 60% by this time of the year?
2. Understand your risk appetite: You cannot get high rewards without taking on high risk: Not all investments are suitable for you, because they might be too risky for your risk profile. There are no get rich quick schemes – the stock market is not a casino, it takes patience, skill and experience to achieve superior returns. If someone promises to double your money in 3 years, be very suspicious.
3. There is no substitute for quality: Invest in good quality stocks or mutual funds. Don't speculate. In a bear market, the speculative names are the ones that fall the fastest. Build your portfolio on a strong foundation. The newest NFOs might not be the safest things for you to invest in, because they are untried and untested.
4. Don't invest blindly: Invest towards meeting your financial goals: Don't just believe what your friends or neighbours are telling you about their investments, these investments might not be suitable for you. Invest because you have a certain goal in mind such as planning for your retirement, or buying a house, saving for your daughter's wedding or son's overseas education. This will help you match the right investment product with the right goal.
5. You cannot successfully time the market: If you believe that you can sell at the top and buy at the bottom, we hate to break this to you but you are not a genius. Its never been done successfully by even the world's leading investors, so don't try this strategy at home!

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