Monday, 8 June 2009 13:44
Investing in any economic situation can be difficult and the current environment only heightens how the following mistakes can cause you long term problems if you don’t avoid them. Shopping without a List: Always determine your portfolio strategy before buying any investment, what will be your mix of stocks, bonds and cash equivalents? Base your buying on when you will need the money, your assets and your risk tolerance. Heard about a Can’t Miss Stock: Jumping from one strategy to another can be disastrous for your overall portfolio performance. Investing strategies are never right through all market cycles but if your plan is sound in the end your be better off than following the latest hot trend. Likely you are too late to reap the rewards and you always have to have a longer term horizon in mind when picking an investment strategy. Ticker Shock: If you check your stock, bond and mutual fund earnings round the clock you can succumb to short term decision making that can negatively impact your long term strategy. Short term market movements can seem much worse than they actually are if a longer term horizon is used. Crisis Management: Don’t let any market volatility factor into your decision to exit certain types of investments or to avoid certain types of investment. Let your overall plan decide which investment types to keep in your portfolio. All Your Eggs In One Basket: Many investors think if they own several mutual funds then they are well diversified but if they haven’t compared the stocks owned by each mutual fund they may not be as diversified as they had hoped. Make sure to compare all the fund’s reports to ensure maximum diversification.