In sports, championships often boil down to this fact: your team may have had success after success, but it’s their mistakes which determine whether they win or lose.I believe that’s true with investing, too. If you’re disciplined enough to avoid making mistakes, you’ll win most of the time. Here’s what I believe are the top 10 investor mistakes:
- Believing that one guarantee covers everything. When somebody says that your principle is guaranteed, does that mean your original investment amount is guaranteed, or your returns are? Learn the specifics.
- Doing nothing. I recently met a couple who heard my advice to get out of the market in November 2007—and they’re still out. They’ve been out for four years now, not making any money. Not a good idea.
- Buying investments for tax benefits. Don’t buy something just because you’ll get a tax break. Invest because you’ll get a financial benefit. Tax breaks are gravy, not the maincourse.
- Making a purchase or sale based on a previous price. Don’t make decisions based on the price you invested at. You may have bought something at $10.00 a share, but don’t fall in love with that number. You’ve got to look at the future and make your decision based on the investments’ prospects.
- Buying based on a hot tip. Once you’ve heard a hot tip, it’s already cold. Last year is gone, and it’s not coming back.
- Owning too many of the same thing. I meet people who have 28 different mutual funds and all invested in the exact same thing. Diversify.
- Owning too many accounts. Some people have 17 IRAs and 12 brokerage accounts and on and on. You can’t manage that many accounts well.
- Taking advice from the media. Money Magazine is great, but it shouldn’t be your financial advisor. What’s printed is already old news. You don’t want to buy yesterday’s picks.
- Replaying the past. If you lost money in the past, and you keep employing the same strategy (or lack thereof), you’re going to lose money again.
- Not having a sell strategy. It’s possible to avoid losing money in the next bear market Plan for the inevitable. Create an exit strategy.
These mistakes can be avoided. You can be a successful investor, just by steering away from the small mistakes that can cost you the prize.
About The Author: The host of the popular radio show, “Money Matters with Ken Moraif,” Ken specialises in retirement planning and offers free seminars that help attendees learn to plan their retirements and secure their investments. A certified financial planner, Ken also heads the financial & retirement planning firm Money Matters with Ken Moraif.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Information presented does not involve the rendering of personalised investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio.
All investment strategies have the potential for profit or loss.
MMWKM Advisors, LLC, is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
Tax and estate planning information should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.