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Common Investment Mistakes

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#1: Inappropriate Asset Allocation

#1: Inappropriate Asset Allocation

Investing either too conservatively, which can result in returns too low to meet your financial goals, or investing too aggressively, which might cause you to panic out of the market at a bad time.

#2: Too Many Eggs in One Basket

#2: Too Many Eggs in One Basket

Diversifying your portfolio by investing in different asset classes will spread out your risk and provide a smoother ride. Don’t own too much in any one style, sector, or single stock; including your employer stock.

#3: Trying to Time the Markets

#3: Trying to Time the Markets

"Do I Feel Lucky?' Well, Do Ya... PUNK?" - Dirty Harry

The old adage; “It’s not about timing the market, but about time in the market.” 

Peter Lynch said; “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves."

#4: Not Factoring In Inflation

#4: Not Factoring In Inflation

Inflation is usually a slow, silent portfolio killer. Recently, everyone has been getting first-hand knowledge at how devastating inflation can be on your buying power.

#5: Chasing What Was Hot

#5: Chasing What Was Hot

Past performance is NOT indicative of future results.

#6: Paying High Advisory Fees

#6: Paying High Advisory Fees

The industry standard advisory fee is about 1%. I feel advisory fees over 1.25% are excessive and can have a significant effect on wealth over the long term. If you are paying a high fee because your friend or neighbor is, here is a video to watch concerning herd mentality.

#7: Panic Selling

#7: Panic Selling

When a store has a sale, people run to the sale to take advantage. Have you seen the lines on Black Friday? The bigger the sale is, the more desire to get in the store.

When Wall Street has a sale, the bigger the sale is, the more panic and desire to get out.

 #8: Paying too Much to Your Uncle Sam.

 #8: Paying too Much to Your Uncle Sam.

There may be numerous tax planning strategies that you are not considering or taking advantage of. On the flip side, don’t focus so much on avoiding taxes that it causes you to make bad investment decisions.

#9: Trading too Much or too Often

#9: Trading too Much or too Often

To quote famed economist Eugene Fama, “Your money is like a bar of soap – the more you handle it, the less you’ll have.” You want to rebalance your account when needed.

#10: Unrealistic Expectations

#10: Unrealistic Expectations

No one can predict the stock market. Determine a reasonable rate of return based on your asset allocation.

#11: Letting Your Emotions Get In The Way

#11: Letting Your Emotions Get In The Way

Focus on the long-term. Don’t let fear and greed drive your decision making. Long-term investors can benefit from irrational behavior of others.

#12: Hope Is Not A Strategy

#12: Hope Is Not A Strategy

A great football coach, Vince Lombardi said, “Hope is not a Strategy.” Winston Churchill said, “He who fails to plan is planning to fail." Have a plan.

Questions? Comments?

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