Back in 2001 when Nortel stock was taking the big plunge, I was on a work term with Nortel, so there was a lot of talk about the stock. I was young and a relative rookie to the stock market but had some cash saved and judging by all the chatter around the office, it was an easy stock to "get rich quick".

A couple months before my work term, Nortel stock made a new high of $120, and the stock market was euphoric. Those who didn’t get into the stock were hitting themselves for not having the foresight, like myself. Then the unthinkable happens, Nortel starts to drop like dead weight and bargain hunters circle like predators. Nortel kept dropping until it found some legs at around $60. The office starts to buzz, and one guy drops his entire $50,000 retirement fund into the stock! So I’m thinking, if Jim can put his entire retirement on the line, I can at least put some of my own skin in the game.  I had $3000 saved, which I thought would easily double to $6000.

My original $3000 investment rather quickly turned to $100.  I ended up writing off that trade which was claimed as a capital loss.

The Lessons Learned:

• Never trade hot stock tips unless you do your OWN due diligence first.
• Don’t jump into the stock market unless you know what you’re doing.
• If you are going to play with "hot stocks", don’t invest more than you can afford to lose.
• For most investors, index investing is likely the best choice.

Frugal Trader runs the blog over at Million Dollar Journey where you can read the latest on their journey to financial freedom.

Don't forget to check out the past investment mistakes from Ryan (5i Research), Mark (MyOwnAdvisor), Robb (Boomer and Echo) and Iain (Motley Fool). Also, don't miss Peter Hodson's investment mistakes next week. Feel free to sign up for the blog below to be notified when it is up.