9 Common Investing Mistakes

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Identifying and Avoiding Common Investing Mistakes

Investing always involves some level of risk. Even if you make smart investments, you could wind up getting hit with significant losses. Fortunately, there are some steps that you can take to protect yourself.

A good place to start is by identifying and avoiding common investing mistakes like the ones listed below:

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Not Being Able to Let an Investment Go After A Loss

A lot of investors struggle with the thought of selling at a loss. Instead, they hold on, hoping that the investment will climb back up to a point where they can at least get their initial investment back. In my opinion, this is partly due to the fact that we are conditioned to be competitive from the time we are young. The thing to remember is that investing is not a competition and you don’t have anything to prove. Take an honest look at each of your investments. If you wouldn’t buy them today, the time has probably come to sell. Even if you take a loss, you can invest the money that you make in more profitable ventures.

Failing to Sell After A Gain

A lot of times, investors also struggle to sell holdings that have appreciated in value. Typically, this stems from the fact that they are worried that the value of the investment will continue to rise after they sell the holding. While this does sometimes happen, the opposite also occurs where the value drops, and any gains are lost. In order to keep from losing what you have gained, you should consider selling at least a percentage of the holding. That way, you can make some extra money to invest in other areas. This is an effective technique to use when rebalancing your portfolio.

Failing to Come Up with An Investment Plan

You probably wouldn’t head out on a long trip without a GPS device or a map to help you find your way. The same should hold true for investing. Chances are, you probably have goals that you want to achieve with your investments. For instance, you might be building a retirement nest egg or helping to put your kids through school.

If you don’t take time to plan your financial future, you won’t have any idea how much money you need to make or what level of risk is appropriate.

You also won’t be able to tell whether or not you are making any progress toward your objectives. Making investments without a plan is a lot like driving your car around in circles without any direction in mind.

Attempting to Predict What the Market Is Going to Do

The market is unpredictable. Even during periods where it seems like it is going in a particular direction, trading always has ups and downs. It isn’t practical or advisable to try to time your buying and selling based on your predictions about what the market will do.

Being Overly Concerned With Taxes

The taxes on gains from investments that are held in accounts that are taxable are quite high. Even though it is always a good idea to try to minimize your tax liability as much as possible, I believe that it is better to get taxed on a gain rather than having to deal with a loss.

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Failing to Monitor Your Portfolio

Keeping tabs on your portfolio is important. Anytime a change occurs with a particular company, you should take a look at what the stock is doing. For instance, management changes, acquisitions or mergers, the introduction of a new competitor, or large selloffs of stock by the company’s leading executives are all situations that could affect the value of the stock.

This holds true for mutual funds, too. If there are changes in the manager of the mutual fund or if the assets that are being managed suddenly drop or increase from the norm, it is a good idea to take a closer look at the fund to see if you should sell it.

Not Maintaining A Balanced Portfolio

Along with planning your investment strategy, you also need to regularly balance your portfolio. Ideally, you should have a plan in mind for the various types of investments that you want to make and the total percentage of your portfolio that each investment type will comprise. Spreading your money across a variety of different investment vehicles is always a good idea. When crafting your investment policy, come up with a maximum and minimum percentage for each type of investment. Each year, sit down and evaluate your portfolio to make sure that your investment distribution is still in line with your investment policy.

The performance of various investments can differ over time. As a result, your portfolio can become unbalanced. In order to minimize risk, you should periodically rebalance it. For instance, if you have allotted 60% of your portfolio for stocks but your stocks have grown in value and now make up 75% of your portfolio, your risk exposure is higher than your initial plan. If the value of the stocks suddenly drops, your losses will be larger than you anticipated.

Being Held Back by Excessive Fear

This century got off to a rough start in terms of investing. The market dropped significantly between 2000 and 2002. It suffered a major hit again between 2008 and 2009. Not long ago, the Brexit vote also significantly impacted the stock market, causing a sudden, steep drop. All of these events have made investors wary.

Even though this fear is understandable, if you get caught up in the idea that events that have happened recently will continue, you may be too afraid to invest in a way that helps you reach your goals. Obviously, it is important to consider recent events when planning your investment strategy. At the same time, however, you can’t allow your sense of fear to keep you from taking the required action to reach your financial goals. This advice applies to both drops in the market and to prolonged bull markets.

Focusing on Individual Investments Rather Than Building A Portfolio

If you make random investments without following a specific plan, you probably won’t achieve the success that you want. Think of it like football. Every member of the team has a specific role that they fill. Together, all of the players come together to create a winning team. The same concept should apply to your portfolio. Each investment you make should fill a role in your investment strategy, helping you put together a winning portfolio.

There are no guarantees when it comes to investing. However, you can minimize your risk and improve your chances of success by avoiding these common mistakes.

Ten Points to Consider Before Investing

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Read These 10 Things To Think About Before You Start Investing

Given the recent events in the markets, you might be wondering if you should be making any changes to your personal portfolio of investments.

Getting the assistance and consultation that a certified investment planner can offer might be something that you’d think about doing.

However, before you decide on anything, consider these 10 important areas and ideas …

1) Formulate Your Basic Financial Roadmap:

If you’ve never before made out a financial plan, then you should do so.

It’s a chance to sit down and honestly assess your whole financial situation as it currently is, and this is a smart move to take prior to any investing decisions.

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The first step in any successful investing is going to be identifying your risk tolerance and goals, either by yourself or with the assistance of Burlington financial investment advisor who has been vetted in the industry. There’s never a guarantee that your investments are going to make you money. However, if you have the right facts about both saving and investing, and then commit to a smart plan, then you should be able to generate financial security over the coming years and enjoy the advantages of having managed your money well. Hiring an experienced financial advisor goes a long way when thinking about the direction you want to go.

2) Analyze Your Comfort Levels In Terms Of Risk:

Any investment is going to involve a degree of risk. If you’re looking at securities like mutual funds, bonds, or stocks, then it’s crucial that you know prior to investing that it’s possible to lose a portion or even all of the money that you put into it. Deposits into many banks are insured by the FDIC, and the same goes for credit unions covered by the NCUA. However, money you invest into securities is rarely federally insured. You can lose your entire principal, which is how much you invest. This can happen even when you buy investments through a credit union or bank whose savings and checking deposits are insured.

However, with risk usually comes a reward, and in this case, it’s the possibility of an investment return greater than the principal that you put into it.

If your financial goal is one with a longer-term horizon, then you’re more than likely going to make the most money by investing carefully into asset categories with higher levels of risk, such as certain stocks and bonds, instead of restricting investments to lower-risk assets, such as cash equivalents. On the flip side, solely investing in cash investments might be more appropriate for shorter-term financial goals.

The main concern for anyone investing in cash equivalents is the risk of inflation, which is a risk if inflation outpaces and even erodes returns over the course of time.

3) Picking A Proper Investment Mix:

When you include asset categories that have investment returns which rise or fall during various market conditions in your portfolio, you can protect yourself against losing too much. There are three major categories of assets, being stocks, bonds, and cash. Historically speaking, they don’t move in unison, meaning they don’t all three go up or down simultaneously. Market conditions which might make one of them perform well can actually encourage poor returns in another category. If you invest in all three categories, then you minimize your risks of losing money, so the overall returns you get from your investment portfolio are going to go a lot smoother. If you see a dip in the returns from any one investment category, you can counteract those losses by having higher returns in one or both of the other two categories.

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Additionally, asset allocation is crucial since it has a significant influence on when or even if you’ll wind up meeting the financial goal that you established. If you don’t put enough risk into your broader portfolio, then your investments might not generate substantial enough returns to make it happen. For instance, college educations and retirement are both long-range goals for many, but the majority of financial experts out there are going to tell you that at least some portion of your portfolio will have to be stocks or mutual funds that involve stocks.

4) Be Wary Of Investing Too Heavily In Any One Stock:

Have you ever heard that you shouldn’t put all your eggs into one basket? Of course you have. It might be a cliche, but it’s also one of the most pertinent ways to minimize your risk because it means that you diversify your investments. When you pick the proper group of investments in any asset category, then you can possibly limit any losses and smooth out the fluctuations of your investment returns all while not giving up too much of your possible gain.

You expose yourself to too much risk if you invest too heavily into any individual stock, and that’s doubly so for your own current employer’s stock. If your employer stock doesn’t do well, then you’re going to lose out on a lot of your money, and possibly even your primary source of income if you lose your job!

5) Make A Rainy Day Fund, And Keep It:

Do you have six months of income saved up in a very conservative savings product or account to handle emergencies like losing your job?

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If you don’t, save up to that before you do any other kind of investing. You’ll sleep better at night knowing that it’s there. Also, never touch it unless you really need it. If you can, fill it up to nine months or even two years.

6) Pay Down High-Interest Debts:

If you have any high-interest debt, such as credit cards, pay them off as quickly as you can. This is a strategy for investing in your future that pays off really well, and with no risk. When you owe money like this, then paying down the balance as much as you can as quickly as you can is a smart decision in all market conditions.

7) Use Dollar Cost Averaging:

Dollar cost averaging is one particular investment strategy that can give you protection from putting all of your available money in at a moment that could prove to be wrong. Instead, what you do is consistently add sums of new money to your investments over a longer span. When you invest regularly, typically with identical amounts every time, then you get to buy more investments when prices are rather low but less when the prices are instead high. Individuals who typically make lump-sum contributions to their individual retirement accounts usually do so either in early April or at the end of a calendar year. Instead, they might want to think about this investment strategy as a way to smooth out their ride in volatile markets.

8) Don’t Leave Free Money On The Table:

Quite a few employer-sponsored retirement plans involve the employer matching some or even all of the contributions.

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If you have access to one, make sure that you contribute enough to get the full match, otherwise, you’re letting free money pass you by.

9) Re-balance Once In A While:

Re-balancing is as simple as putting your portfolio back to the original mix of asset allocations that you had decided on. When you rebalance, you’ll make sure that you get your portfolio back to your personal comfort level in terms of risk, nor will it overemphasize any particular category of assets.

Re-balancing shouldn’t be done too frequently. Either do it when one of your asset classes gets too far out of whack, or just every six months or every year.

10) Don’t Fall For Fraud:

Scammers read the headlines just as much as you do, if not more so. Many time, they’ll exploit very public news in order to trap prospective investors by making the ‘opportunity’ they offer sound reputable. SEC recommendations for investors include asking lots of questions and verifying those answers with unbiased sources prior to investing.

Take your time and talk to people that you trust.

Gold and Silver – Still a Good Investment

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Is Investing in Gold and Silver Still a Wise Choice

Investors continue to turn to precious metals, especially considering the purchasing power of the U.S. dollar continues to decline year after year. A lot of people still don’t realize that the dollar’s decreasing value is an ongoing think and that one of the best ways to protect one’s purchasing power is holding precious metals.

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Many people can’t grasp the concept of dollar devaluation, but we will go into more details about this, so you have a better idea of things.

Gold: is it a Good Investment

If you purchased $100 in gold in 1971, it would be worth around $3,000 today. Let’s discuss how much your investment would be in regards to individual purchases. That much money would allow you to buy six tickets to the Bahamas, a very good television set, a paid sports package for three decades or you could payoff your electric bill for a year or two.

The purchasing power of your 1971 dollars are maintained and it has actually increased. However, if you only saved $100 in cash, then you would still only have that amount. In today/s world, it would have only retained around 17% of its former value.

Silver as an Investment

Let’s say you bought $100 in silver in 1971, you would have over $1,000 in today’s money. Even $1,000 can buy a lot of things, such as four months worth of groceries, surround systems, a few quality cameras and weekend getaway and many other things. In short, $1,000 can go a long way in terms of purchasing things.

The government prints money out of thin air or they simply inject new dollars into the country with just a few keystrokes, and this is why real silver and gold will continue to rise in price. It’s always a good idea to invest in different types of money, especially one that is proven to stand up against time. This includes silver and gold bullion.

How To Invest In Silver

Many people are interested in buying gold and silver. In fact, a lot of people tool advantage of the falling prices of silver and gold.

This is because they wanted to add to their precious metals portfolio.

Silver: Is It A Safe Investment

Silver is a safe investment, and the longer you decide to hold onto it, the safer it becomes to hold and maintain. Unlike a company that you buy shares in, silver won’t go bankrupt. Unlike investing in bonds, silver cannot default. These are only a few examples of how it is a safe investment.

Silver has many uses, which is why it won’t ever go to zero. It has a history of being used as a form of currency, and this goes back many years. The bottom line is there will always be a market for silver coins, regardless of how much money they are worth.

Gold Or Silver

A lot of people fully understand what buy low sell high means. However, a lot of people wait until the prices of silver and gold have skyrocketed before they decide they want to invest in it. In other words, they tend to wait far too long before making a decision.

Still, many people have their own reasons for buying. Some are confident in their decision. Some people will still have questions they don’t have answers to.

One of the most common questions people ask is how can people spend their silver and gold assets in a barter-type economy. People often want to know if they can take their gold and silver to a shop or give it to a tradesman in exchange for their services. The bottom line is people want to know if they can spend silver and gold as if it were money.

Silver and gold has many advantages in regards to financial transactions. Every single deal requires a seller to make an offer, as well as a buyer to accept the offer. No deal is made unless the buyer pays the money, and the buyer has the final say in whether or not they should walk away from the deal so they can find a seller that accepts silver and gold.

There may come a time when the U.S. dollar collapses, and this can cause you to suffer tremendously, in terms of finances. Hyperinflation can send the price of the dollar to soar. If either of these happens, your silver and gold assets will still have value, which means you’d be more than likely able to use those assets to barter for services and goods.

Gold Or Silver: Which Is Better To Invest In

It’s a good idea to invest in both. Having gold and silver gives you more power to barter and trade.

Plus, you’ll have more versatility.

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Gold and silver may both be precious metals, but they can perform very differently in various economic conditions. For example, when a credit crisis hits or if deflation occurs, then gold tends to fair better. Silver tends to do better than gold when inflationary upswings are occurring.

There will be times when silver will be priced better than gold and vice-versa. Silver might be the better metal to buy when the ratio for gold/silver nears the high end of the normal range. As of lately, gold tends to be more expensive, and this is why more people are buying silver. It’s all about keeping an eye on the market.

If a total breakdown occurred, then precious metals would become a main form of currency. Most people would have no problems accepting it. This goes for services and goods too.

 

 

In a financial collapse, those who hold silver and gold would be in charge of transactions involving metals, not the sellers.

Remember, you need the services and goods, but the seller needs currency.

If the seller is competing with other sellers, then you’re the one in charge, not the seller.

If a financial collapse happened, then you would be glad to own silver and/or gold.