Six Mistakes Investors MakeInvesting
You work hard for your money and there are certainly more than enough challenges in saving for retirement, college education for your children and all the normal costs of modern living. You want to avoid making mistakes with your money and thereby increase your chances of success in achieving your financial goals. Here are six common mistakes to avoid:
Making emotional decisions. Investors get too emotional over moves in the value of their investments. They can get too euphoric or too fearful which causes them to make emotional decisions instead of rational decisions. Buying high and selling low are the results of this mistake.
Being impatient or not maintaining the appropriate time horizon. This is related to making emotional decisions above. When you are euphoric or fearful you tend to forget your original time horizon (ie. 30 years to retirement) and then lose your patience and buy or sell at an inopportune time.
Paying too much in fees for your investments. Most investors have no idea of the expense incurred in buying, holding and selling various investment vehicles. There are many different expenses built into the investment process. Investors need to understand the costs and expenses they are paying, compare costs of alternate investments, make informed decisions and minimize total investing costs.
Paying fees for investments and not receiving ongoing advice after the purchase. If you are going to pay an ongoing fee for the management of your investments then you should be meeting with your adviser on a regular schedule so that you are receiving the value you are paying for.
Buying illiquid investments. Why buy an investment that you cannot easily sell. There are investments that are not publicly traded, have surrender charges or transfer fees, or have other restrictions on their sale. There is no reason to buy these investments as low-cost liquid alternative investments exist. Why give up the flexibility to turn your investment into cash if needed at a moment’s notice if you don’t have to?
Buying investments when you have high-cost debt. There is no sense in saving or investing money when you are paying double-digit interest on your credit card and other debt. Pay off your high-interest debt, set up a budget to avoid future debt and determine how much you can save each and every month.
By avoiding these all-too-common mistakes, investors can maximize their investment returns and increase the odds of successfully reaching their goals. Let us know if we can help.