10 Key Investor Mistakes...

So, let’s consider some of these mistakes.  I’ll point out first though that the market doesn’t make mistakes (investors do!).  By ‘market’, I mean the global stock market or global equity market, where all the large companies in the world are generally operating.

The market does what it’s always done, which is move in cycles. Once a decline is over, it will continue its on its journey to deliver returns to those that have stayed the course and kept their faith in it.  Investing should be a ‘buy-and-hold’ approach, not dancing from one type of investment to another.

1. Understanding The Journey

It’s important to understand that the market declines 25% of the time and increases in value around 75% of the time. These are good stats!  The times when your investment values fall are just stages in the journey.  Necessary stages.

2. Not Sticking to Your Plan

Your financial plan is the important thing to focus on, not the temporary declines, volatility or unpredictability of investment markets.  What do you need your money to do for you in the LONG-TERM?  Keep that in mind and try to forget about short-term falls or surges.

3. Acting on Fear

This is the emotion you feel during a temporary decline. It often involves people selling out of their investments which is, actually, the time that they should be buying more! I know that might sound a bit bold so I’ll leave it out not selling out! 

4. Unnecessary Tinkering

Changing your investments because they may have not performed well over a short period can be dangerous. This leads onto the next point (timing the market). Not all your investments should perform well or badly at the same time. That’s called diversification and is there to protect you.

5. Tming the Market

This deals with situations where people sell their investments temporarily in order to buy in later. How do you know when to sell? How do you know when to buy back in? This is what timing the market is and, frankly, there is no evidence to suggest it works. You’re better simply holding on to your investments throughout.

Video Block
Double-click here to add a video by URL or embed code. Learn more

6. Not Understanding What Fixed Income is For

Fixed-income January relates to things like bonds and cash. These, in our own portfolios, tends to be much safer types of things to own then stocks and shares. They’re not there for growth, they’re there to dilute the ups and downs of the stocks and shares don’t look for stacks of growth from fixed income, that’s not what it’s for.

7. Trying to Pick Winners

You’ve probably got as much chance picking investment winners on a consistent basis as you have on the 3:10 at Newmarket. You’re better owning everything in your portfolio rather than trying to go for specific investments which you think might do well.

8. Looking Too Much at Your Values

I know it’s natural for you to want to check the values of your invested money. Why wouldn’t you? That said, looking at it too often can Bring some degree of anxiety. If you’re going to check it, I wouldn’t do so more than a few times a year. Then you’ll be getting a more accurate picture of its journey. 

9. Forgetting Why You’re Invested in the First Place

Most people invest for the long-term. Indeed, if somebody asked me to invest their money for, say, 2 or 3 years, I wouldn’t do it. Investing is a long-term enterprise.  An enterprise that will involve lots of ups and lots of downs. It’s par for the course and you shouldn’t lose sight of why you’re on that course.

10. Paying Attention to the Media

The media has Its own interests. Why deliver a news item with a moderate view? Frankly, for them, there’s no point because they’re in the business of sensationalism and they’re interested in short term stories to get readers or viewers. You’re interested in the long-term game.

I hope this has been useful.  Remember, investing is different to speculating.  Speculating is taking ‘punts’ on what you think will do well in the short-term.  Investing should be a process that you should follow for the long-term!

Talk to you soon!...

Marco