Eye Off the Ball

My dumbest investment was loading up on Freddie Mac back in September, when it was going up for a brief period. My next dumbest moves were not following the news on the company after having purchased the stock and holding on to it for too long. Needless to say, I found out about the government takeover when it was too late for me to sell out, so I hopelessly watched myself lose thousands and thousands of dollars in a matter of seconds as the price quickly dropped from around $5.10 a share to around a $1 a share, where I finally sold.

— Mike, Centreville, Va.

The Fool Responds: At least you sold then — last time we checked, the stock was trading for considerably less than $1 per share. Many people mistakenly think that a stock that has fallen far can't fall much further. About a year before you bought into Freddie Mac, it was trading in the $60s. Remember that if a company has dropped sharply, something is going on and needs your attention. Such holdings should be followed closely and are often best just avoided altogether.

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