One of the most common investing mistakes make by those who are just beginning to use trading stocks and bonds as long-term investments is holding on to “dud” stocks. These stocks might be from companies that are losing ground in the stock market or from companies who are not well known enough to have any significant knowledge of how their holdings will do on the market.

Many times, novice traders are worried that if they’ve already lost a significant portion of their investment, holding onto it in the hope that it will go back up in price is a prudent move. It might not feel quite as wasteful to hold onto the stock than just cutting connection with the stock and taking whatever losses are due. However, holding onto a dud stock is a classic novice mistake and usually results in a higher net loss than investors who wisely cut ties with dud stocks when they reach a certain level of market depreciation. For instance, having a standard method of dropping a stock once its lost 25 percent of the original value it was bought at will and using the money to invest in another stock will usually result in a better financial position that holding onto the stock.

There are certain caveats to this advice, obviously. If there is an event that significantly affects the price of a stock that you or your investment advisor believes is temporary (such as a merger, an unpopular announcement or just a bad public relations move on the part of the company you hold stock in), it’s not necessary to sell right away. However, just elevating yourself past the thought that a captain going down with his ship is more noble than cut and running will allow you to make better decisions about your stock investments.

Every investment opportunity comes with it a degree of risk. However, you can minimize your risks if you thoroughly understand the financial situation you’re considering. Many people tend to trust their financial advisors and not want to get too involved in the daily dealings of their finances, but a large part of your future is dependent on what investments you’re involved in and how well they do.

First of all, read the entirety of your account agreement. This can be quite a task, especially with the agreements that are several or even dozens of pages long – the more complex your financial agreement, the longer your agreement is likely to be. While there may be a significant amount of legalese that can be difficult to muddle through if you’re not trained in financial concerns but there are a couple key points you can look out for. Identify who makes the decisions that affect your account and understand how the investment firm expects you to pay for their services.

Know exactly what your risk is and make sure you’re willing to take it. Many investments have the chance to lose even your principle if things go very poorly with the market, but some investments, like options, can actually risk more than just your initial investment. Talk with a financial planner about the investment and make sure that what you’re agreeing to meets your risk profiles and your future financial plans.

Lastly, keep an eye out for your own interests and know what the red flags are for the investment that you’re engaging in. One of the more general red flags is excessive transactions to and from your account, which may be making money for your firm but have no actual financial benefit to you.

If there’s any part of your agreement or the investment process that you don’t understand, seek either legal or financial counsel outside the firm for some advice before signing with the company.