Our new independent research company has been in operation for four months now. Unlike during our life as a mutual fund manager, our new role gets us much closer to individual investors, and we get to directly answer their investment and company questions.

In four months, we’ve learned lots. Individuals investors, like us, are skeptical of many things. On average, they worry—a lot. Generally, this is a good thing. It’s YOUR money: No one else is going to care about it as much as you do.

But, as a group, individual investors make a few common mistakes as well. Let’s review some of our recent findings from our new dealings with you, the individual investor.

Canadian investors, to us at least, seem far too enamoured with junior resource stocks. Likely a carry-over from the commodity-boom times, most investors we talk to want to know about this penny-mining stock, or this junior oil exploration company, operating in god-knows-where. Often, when we research these names, we find they are trading at three or four cents, have never made money, and are always, in fact, running out of money. Our take on this? Investors need to realize that investing in these types of names is gambling, not investing. 

Investors also seem, to us, too focused on quarterly earnings. If a company misses a quarter and the stock goes down, it is NOT always a disaster. Sometimes, it is because a company is investing for a prosperous long-term future. We have found over the years the best companies to buy are the ones that think long term, not the ones that think for 90 days. Getting panicked out because of a quarterly earnings miss sometimes gets you out of great companies far too soon.

Investors these days are exceptionally skeptical of brokers, fund companies, investment bankers and anyone else in the investment industry. This view likely stems from 10 years of weak markets overlain with still-high fees in the industry. Of course, the recent debaucle of selective disclosure on the Facebook IPO hasn’t improved this viewpoint.

Investors are not worried enough, however, about financing needs for smaller companies. It is simple math: If a company’s shares fall from $3.00 to $0.50 (like many juniors have), their financing needs don’t change. If the company needed $10 million to drill (or whatever) at $3, they still need $10 million at $0.50. Except now, the company needs to sell 20 million shares to get its money, rather than 3.3 million shares at the previous price. This dilution means it will be harder and harder for any investors in the company to ever make money on the stock. We call it a small-cap-financing-death-spiral.

Other investors, on the other hand, are far too focused on dividends. Sure, they’re great, but you shouldn’t forget about growth. One day, growth will come back.

Finally, too many investors want perfection. Rather than looking at an overall portfolio, they tend to focus on the one or two names that have gone down. Your portfolio might be up 15%, but some investors get obsessed over the single name that is down 20%. Remember, this diversification, tough as it is to see, is actually helping you. That stock you now consider a loser might actually help your portfolio in a week or a month or a quarter. Maybe it is a great buying opportunity, but all you can think about is selling it. You need to remember the big picture. If every one of your investments worked out perfectly, you’d be, well, you know, not of this Earth.