There are a wide range of mistakes an investor is liable to make, but there are a handful that seem to come up over and over again. In fact, inexperienced and nave investors have been making the same kind of mistakes ever since modern markets were established. To make sure you dont get chewed up by the markets as soon as you step into them, make sure youre avoiding the following blunders
If youre investing in order to have a comfortable retirement, then you shouldnt be worrying about what the stock market does this year or next. Even if youre getting close to retirement, youre still likely to have 15 to 20 years to make smart decisions in. If youre looking ahead and planning to leave some healthy assets to your children, then your time horizon needs to be even longer. The point here is that you should always be looking far ahead in everything you do. Your biggest concern might be the future of a certain industry right now, but in a few years it could be finding investment lawyers to help secure your EB-5 green card. Many investors hurt themselves by being too short-sighted. Dont be one of them!
Hanging on Financial Medias Every Word
It may not seem this way, but theres almost nothing that gets covered in financial TV shows that can help you towards your big investment goals. This goes for a lot of popular newsletters as well. Even if these channels did broadcast valuable information, what use are they when everyone has access to it? If anyone really stumbled upon highly profitable tips for playing the stock market, they wouldnt talk about them on TV, or sell them too you for a nominal subscription. Theyd keep their cards close to their chest, and make a fortune from the information they have! When youre totally inexperienced, it can be helpful to tune into financial TV shows just to pick up some of the jargon, and understand the factors that cause markets to fluctuate. However, most new investors could benefit a lot by spending less time consuming financial media, and more time creating and honing their financial strategy.
Failing to Rebalance
If you werent already aware, rebalancing is the process of returning your portfolio to its target asset allocation, as outlined in your original plan. This can be difficult, as it forces you to sell an asset class which is doing well, and buy more in your worst performing class. Furthermore, rebalancing doesnt give you much in the way of returns, all the way up to the point where it finally pays off in a pretty spectacular way! Check out any US equities in the late 90s, and youll see exactly what we mean. When you allow your portfolio to drift according to the market, its asset classes will be over-weighted at peaks, and under-weighted at lows. This is a sure-fire recipe for poor performance, so make sure youre rebalancing regularly to reap those big returns.