Great investing is not only about picking winners —
it’s about avoiding big mistakes.
This lesson helps you recognise warning signs early.
Major Red Flags to Watch Out For
1️⃣ High and Rising Debt
- Increasing debt without profit growth
- Frequent refinancing
📌 Debt reduces flexibility during tough times.
2️⃣ Inconsistent Profits
- Profits rising and falling unpredictably
- One-time gains masking weak operations
📌 Consistency matters more than speed.
3️⃣ Weak Cash Flows
- Profits without cash generation
- Frequent equity dilution or borrowing
📌 Cash is harder to fake than profit.
4️⃣ Overhyped Stocks
- Heavy media coverage
- “Next big thing” narratives
- Price moving faster than fundamentals
📌 Popularity is not a moat.
Common Beginner Mistakes
- Ignoring fundamentals
- Chasing recent winners
- Overconfidence after small success
- No margin of safety
- Investing without patience
How to Protect Yourself
- Stick to your circle of competence
- Focus on business quality
- Be conservative with assumptions
- Review fundamentals periodically
Final Takeaway
Avoiding bad investments protects capital.
Good investing is often about doing fewer things right.
📌 Discipline beats brilliance.
👉 Proceed to: Master Quiz – Fundamental Analysis Basics