10 Common Investment Mistakes: Stocks, Bonds & Management
Windowofworld.com – Investment mistakes occur for many reasons, including the fact that decisions are made under conditions of uncertainty that are irresponsibly underestimated by teachers and spokespersons for the institution. Losing money on investments may not be the result of mistakes, and not all mistakes result in monetary losses. But mistakes occur when valuations are overly influenced by emotions, when basic principles of investment are misunderstood, and when there are misconceptions about how securities react to various economic, political, and hysterical conditions. Avoid these ten common mistakes to improve your performance:
1. Investment decisions must be made in a clear investment plan. Investments are goal-oriented activities that must include time considerations, risk tolerance, and future income. Think about where you are going before you start moving in the wrong direction. A well thought out plan doesn’t need to be adjusted frequently. A well-managed plan will not be vulnerable to the addition of trendy speculation.
2. The difference between Asset Allocation and Diversification is often unclear. Asset Allocation is a plan for portfolio distribution between Securities and Securities. Diversification is a risk minimization strategy used to ensure that the size of individual portfolio positions does not become excessive in terms of various measurements. Good “hedging” against anything or the Market Timing Tool. Nothing can be done with Mutual Funds or in a single Mutual Fund. Both are handled most easily using Cost Base analysis as defined in the Working Capital Model.
3. Investors get bored with their plans too quickly, change direction too often, and make drastic adjustments rather than incrementally. Although investment is always referred to as “the long run”, it is rarely handled as such by investors who would find it very difficult to explain a simple analysis from peak to peak. Short-term Market Value Movements are routinely compared to various indices and averages related to un-portfolios to evaluate performance. There is no index that compares with your portfolio, and the calendar division does not have any relationship with market cycles or interest rates.
4. Investors tend to fall in love with securities that go up in price and forget to take profits, especially when the company was once their employer. This is worrying about how often accounting professionals and others refuse to fix this one problem portfolio. Aside from the problem of love, this becomes a tax problem that is not willing to pay which often brings unrealized profits to Schedule D as a recognized loss. Diversification rules, like Nature, should not be confused.
5. Investors often overdose on information, causing a constant state of “paralysis analysis”. Such investors tend to be confused and tend to be retarded and hesitant. Both are not suitable for the portfolio. Compounding this problem is the inability to distinguish between research and sales material … quite often the same document. A rather narrow focus on information that supports logical and well-documented investment strategies will be more productive in the long run. But avoid future predictors.
6. Investors continue to look for shortcuts or gimmicks that will provide instant success with minimum effort. As a result, they started eating madness for every new product and service produced by the Institution. Their portfolios become mutual funds, iShares, Index Funds, Partnerships, Penny Stocks, Hedging Funds, Funds, Commodities, Options, etc. The obsession with this product underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: Consumers buy products; Investors choose securities.
7. Investors simply do not understand the nature of the Interest Rate Sensitive Effects and cannot deal precisely with changes in Market Value in both directions. Operationally, the revenue share of a portfolio must be seen separately from the growth section. A simple valuation of bottom line market value for structural and / or directed decision making is one of the most far-reaching mistakes made by investors. Fixed income cannot link Fixed Value and most investors rarely feel the full benefit of this part of their portfolio.
8. Many investors ignore or ignore the cyclical nature of the investment market and eventually buy the most popular securities / sectors / funds at the highest price ever. Illogically, they interpret current trends in fields such as new dynamics and tend to overdo their involvement. At the same time, they quickly left whatever their hot spots were before, not realizing that they were creating a cycle of Buy High, Sell Low.
9. Many investment mistakes will involve some form of unrealistic time horizon, or a comparison of Apple and Orange performance. Somehow, somewhere, getting rich slowly the road to investment success has been overgrown and abandoned. Successful portfolio development is rarely a straight arrow and comparisons with different products, commodities, or strategies only produce detours that accelerate the progress of the original portfolio objectives.
10. The “cheaper is better” mentality weakens the ability of decision making, leading investors to dangerous assumptions and shortcuts that only seem effective. Do you discount brokers looking for the “best execution”? Can the issuance of new preferred shares be purchased free of charge? Is the no-burden fund a freebie? Are WRAP accounts managed individually? When cheap is the main concern of investors, what they get will generally be worth the price.
Complicating the problems investors have in managing their investment portfolios is the display of sensationalism that the media brings to the process. Investing has become a competition for service providers and investors. This development alone will lead many of you to the self-destructive decision-making mistakes described above. Investment is a personal project in which individual / family goals and objectives must determine the portfolio structure, management strategy, and performance evaluation techniques. Is it difficult to manage a portfolio in an environment that encourages instant gratification, supports all forms of “unsaved” speculation, and which presents short-term and shortsighted reports, reactions and achievements?