{"id":75915,"date":"2015-07-29T05:05:08","date_gmt":"2015-07-29T09:05:08","guid":{"rendered":"http:\/\/countingpips.com\/?p=75915"},"modified":"2015-07-29T06:33:30","modified_gmt":"2015-07-29T10:33:30","slug":"the-six-biggest-mistakes-investors-make","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/07\/the-six-biggest-mistakes-investors-make\/","title":{"rendered":"The Six Biggest Mistakes Investors Make"},"content":{"rendered":"
July 29, 2015<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Investor<\/p>\n

By Tim Maverick<\/a>, Senior Correspondent<\/em><\/p>\n

Investing isn\u2019t a game. If you screw up, real money is lost.<\/p>\n

As a broker and supervisor for a major discount brokerage firm for close to two decades, I saw it firsthand. People lost their children\u2019s college tuitions<\/a> and even their own retirements.<\/p>\n

Now, I\u2019m no longer an advisor, and the following are simply my opinions. With that in mind, here are the six most common mistakes investors make.<\/p>\n

1) Having a Poor Plan \u2013 or No Plan at All<\/h2>\n

Having no plan is just foolish. But a poor plan may be even worse. Imagine someone saying, \u201cI\u2019ll just buy XYZ stock. It\u2019s been doing great. That will fund my retirement.\u201d That should give you a sense of what I\u2019m talking about.<\/p>

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Whether or not they have an advisor, every investor should have a written plan that lays out their specific objectives, including details concerning time frame and risk tolerance.<\/p>\n

Also, as an investor\u2019s financial situation changes, the plan needs to grow and evolve accordingly. Keep in mind that life expectancy continues to rise, so a portfolio needs to last longer than most people think.<\/p>\n

Remember, too, that each person\u2019s circumstances are different. A cookie-cutter approach won\u2019t work, which is why I\u2019m not a fan of robo-advisors<\/a>.<\/p>\n

2) Betting That a Bull Market Will Last Forever<\/h2>\n

Don\u2019t gamble on a bull market in stocks lasting forever.<\/p>\n

That\u2019s the message you\u2019ll get if you watch CNBC, which is full of permabulls. If you must<\/em> watch CNBC, I recommend doing so with the mute on.<\/p>\n

In reality, bull markets aren\u2019t eternal. That\u2019s also the reason I\u2019m not a fan of S&P 500 index funds. If a financial storm hits, you have absolutely no chance \u2013 you\u2019ll go down with the market.<\/p>\n

3) Trusting an Advisor Implicitly<\/h2>\n

Some of you probably have a professional advisor, and that\u2019s great. Just remember the words of Ronald Reagan: \u201cTrust, but verify.\u201d<\/p>\n

Most advisors are darn good at their job. But stay engaged, and don\u2019t just leave everything in the hands of your advisor. Follow the markets and see if you think what your advisor is doing is right. If you have doubts, always get a second opinion.<\/p>\n

I recall the 2008 financial crisis, when many portfolios took major hits. Some advisors resorted to what I call the \u201cThree Stooges defense,\u201d where Curly says, \u201cI\u2019m a victim of circumstances.\u201d<\/p>\n

In other words, some advisors were saying that no one could have foreseen this. Nonsense. The warnings were all there for someone with the market experience to see.<\/p>\n

Ask your advisor if he or she has been through a bear market. Or, if not, see if they can even explain to you what a bear market can do to stocks.<\/p>\n

4) Thinking You\u2019re Diversified When You\u2019re Not<\/h2>\n

In my time as an advisor, I found that many investors didn\u2019t actually understand what they were invested in.<\/p>\n

I can\u2019t even recall the number of times I sat down with a client who proudly showed me their \u201cwell-diversified\u201d portfolio, which turned out to be anything but.<\/p>\n

Here\u2019s an oversimplified hypothetical: Bob had a portfolio with seven different mutual funds that looked good on the surface. But when I dug a little deeper, I had to tell my client, \u201cYou\u2019re not diversified at all. These funds are all heavily invested in technology stocks. You have 40% of your portfolio in one industry in one country. That is not diversification.\u201d<\/p>\n

Needless to say, a reshuffling of the deck was required.<\/p>\n

5) Ignoring the Rest of the World<\/h2>\n

A related problem is absolute lack of exposure to the rest of the globe. A shocking number of clients had zero<\/em> exposure to foreign markets.<\/p>\n

Ten years ago, the United States made up 41% of the world\u2019s stock market capitalization. Five years ago it was 30%, and as of the end of 2014, it was 37% \u2013 barely more than a third. Now, there\u2019s no denying that the U.S. market has outperformed its overseas counterparts in recent years. But that\u2019s still no reason to ignore the 63% of the world\u2019s market cap currently outside the United States.<\/p>\n

I don\u2019t know about you, but I don\u2019t do all my shopping in just one aisle of the grocery store.<\/p>\n

6) Trading With Long-Term Money<\/h2>\n

One final, critical mistake investors make is day trading with their long-term money and trying to time the market.<\/p>\n

You\u2019d be surprised how some people tried to play catch-up in their retirement account by day trading. Warning: I have yet to meet a day trader who has been successful over the very long term. I\u2019m talking decades here.<\/p>\n

Ultimately, I hope my experience working with retail investors proves useful to you. After all, investing isn\u2019t an easy \u201cgame\u201d to master.<\/p>\n

Good investing to all,<\/p>\n

Tim Maverick<\/p>\n

The post The Six Biggest Mistakes Investors Make<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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By WallStreetDaily.com By Tim Maverick, Senior Correspondent Investing isn\u2019t a game. If you screw up, real money is lost. As a broker and supervisor for a major discount brokerage firm for close to two decades, I saw it firsthand. People lost their children\u2019s college tuitions and even their own retirements. Now, I\u2019m no longer an […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-75915","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/75915","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=75915"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/75915\/revisions"}],"predecessor-version":[{"id":75925,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/75915\/revisions\/75925"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=75915"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=75915"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=75915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}