Top 3 biggest investment mistakes
Top 3 biggest investment mistakes
By Jason Lurie of Holland Hahn & Wills
Many people start out managing their own investments. But as earnings and assets grow, financial needs and challenges become more complex — continuing to go it alone can prove costly in terms of investing mistakes.
1. TRYING TO TIME THE MARKET
Investors may be tempted to cash out of the stock market to avoid a predicted downturn. But accurately forecasting the market’s direction to time when to buy and sell is a guessing game.
The lesson? Missing only a brief period of strong market performance can drastically affect your lifetime wealth.
2. FOCUSING ON THE HEADLINES
Investors may become enamoured with popular stocks based on recent performance or media attention—and overconcentrate their portfolio holdings in these companies. It is easy to get caught up in a media frenzy, but data shows that many fast-growing stocks, on average, fail to outperform in subsequent years.
The lesson? Rather than loading up on a handful of stocks that have dominated the market, own many stocks through funds. Diversifying across industries and global markets can help reduce overall risk thus positioning investors to potentially capture the returns of future top-performing companies. It’s a question of not having all your eggs in one basket.
3. CHASING PAST PERFORMANCE
You might be inclined to select investments based on past returns, expecting top-ranked funds to continue delivering the best performance. But can they maintain that outperformance? As with the fast growing stocks, research shows that most funds ranked in the top 25% based on five year returns didn’t remain in the top 25% in the next five years.
The lesson? A fund’s past performance offers limited insight into its future returns.
Working with an advisor:
A qualified financial adviser can offer deeper expertise and insights that lead to better financial habits. They can design a diversified, research-backed investment strategy based on your long-term goals and comfort level regarding risk. Equally important, you can look to a seasoned professional for guidance through different markets to help avoid bad decisions.
If you want to know more about how our financial planning process can help you, or perhaps want a second opinion on your own planning or investment strategy please get in touch:
020 8943 9229 | enquiry@hhw-uk.com | hhw-uk.com
This article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information please contact your Financial Planner.
