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Top 3 Investment Mistakes

Top 3 Investment Mistakes

1. Not Knowing all Expenses
You will never see most internal expenses. Portfolios of mutual funds and variable annuities will likely have costs of 2% per year! Consider Exchange Traded or No-Load funds to lower your expenses.

2. Focusing on Products
Focus on your entire portfolio. Analyze the effect on your portfolio if the equity markets go down 30%. Your portfolio should go down by less than 30%, and you should be comfortable with that loss.

3.  Relying on Emotions
Typical mistakes are:

  • Representativeness– “I work for/know this company, therefore it’s safe.”
  • 1/n- “There are 10 choices for my 401(k) investments; I’ll put 10% in each.”
  • Loss Aversion- “My investment is down 10%, but I haven’t lost anything until I sell.”

Write down your reasons for buying/holding an investment. Revisit biannually and, if they change, take action.

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