The Biggest Mistakes Investors Make (Part 2 of a Series)

by financialmom on September 23, 2011

in Investing

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I’m sure all of you have heard the old saying, “Don’t put all your eggs in one basket.”  This applies to many areas in life, including investing.  Today I am continuing the series on The Biggest Mistakes Investors Make (see Part 1 here), because I see investors making these same mistakes over and over again.  

Here’s some more of the Biggest Mistakes Investors Make:

1)  Thinking “I have no money to invest.”  People routinely tell me the reasons they can’t invest right now.  They say things like: “I’ll come see you to invest when . . . .”  The common theme is they think they don’t have enough disposable income to invest. 
 
The problem here is thinking investing will only happen if there is money left over at the end of the month. Putting investing last means it will never happen.  Make it a priority.  I challenge you to show me your checkbook, and I’ll find money you could be using to invest.

2)  Investing before having an Emergency Fund.  It makes no sense to invest before you have an emergency fund in place.  You will just end up selling your investments, or using credit cards to pay for your emergencies.  Get the emergency fund in place first!

3)  Investing when you have Debt.  Here’s a shocking statement – if you have any debt besides your mortgage, you have no business investing.  Get rid of the debt, and then get very serious about your retirement.

4)   Not Considering your Time Horizon.  One of the most important factors in choosing your investment’s asset mix is your time horizon to hold the investment.  If you are not going to use this money for many years, you can take more risk with it, since you have the time to ride out the volatility of the markets.

5)  Watching and Believing the Media Hype.   Get yourself an investment philosophy you can believe and stick with, and forget what the media is saying.  Don’t forget – the media exists to get readership, viewers, and market share.  The media does not exist to do what is in your best interests.

6)  Thinking the Government is your Retirement Plan.  If you are still thinking the government is going to fund your retirement, plan on living at or below poverty level.  Social Security may not be there in its current form when you retire.  You need to take responsibility for how you will live in retirement.

7)  Thinking “I’m Too Young/Too Old to Invest.” If you think you are too young to invest, plan on doing things the hard way later, like many boomers are experiencing right now because they didn’t bother to save when they were young. 
 
Talk to a financial advisor, and find out just how little it takes on a monthly basis to build a great retirement fund, if you start early enough. If you think you are too old to invest, think about all the great charitable causes you can leave a legacy to after you are gone.  It’s about you something much bigger than you.
 

8)  Putting your Retirement in One Basket.  If you have all of your retirement, or a large percentage of it, invested in your company stock, you are taking way too much risk.  If your company goes bankrupt, you may be left with nothing.  If you think this could not happen to you, talk to past employees of Worldcom, Enron, and Kmart, just to name a few.

9)  Not Understanding your Investments.  You need to know the what, why, when, and how of your investments – all the reasons you did it in the first place.  If you don’t know these answers, how do you decide whether it’s doing what you want it to in the future?  Especially important in this discussion is all the costs of your investments, which directly impacts your returns.
 
10) Not Checking Out your Financial Advisor.  Do yourself a big favor, and make sure your financial advisor has a clean record.  If your advisor is a broker, you can do a broker check on the FINRA website.  If your advisor is a Registered Investment Advisor, you can check them out either with your state agency, or the SEC website.  An easy thing to do – save yourself from being the victim of a Ponzi scheme. 
 
None of this is rocket science.  It’s all very common sense stuff. I want you to have a very successful financial future, and not have to do things the hard way when you are close to retirement and panicking.  If any of this is confusing to you, it’s time to find yourself a trusted financial advisor who will educate you. I am committed to doing exactly that!


New Profile Pic 2599R The Biggest Mistakes Investors Make (Part 2 of a Series)Pamela Otten is CEO of Pamela Otten LLC, a Registered Investment Advisor. She loves to work with women business owners and entrepreneurs, and women in transition due to job change, death, or divorce. Pamela will help you set and reach your financial goals, educate you to understand your investments, and teach you how to do more charitable giving. Pamela is a Qualified Kingdom Advisor (www.kingdomadvisors.org), trained and committed to integrating biblical principles with her investment advice.

cc smallest The Biggest Mistakes Investors Make (Part 2 of a Series)Photo Credit – woodleywonderworks

Financial Planning, Investment Advice, and Investment Management provided through Pamela Otten LLC, Registered Investment Advisor.

The opinions voiced in this material are for general information only, and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult your financial advisor prior to investing.

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