Water Well Journal
Issue link: http://read.dmtmag.com/i/573697
D espite all that has been written over the years about avoiding the most common investing mistakes (includ- ing the ones I wrote about recently), many of us seem to make the same ones over and over again. Since my column on unfortunate investing mistakes appeared (WWJ August 2015), I've heard from a number of readers who reminded me there are plenty others I should have mentioned. So here are seven more common mistakes you should avoid. 1. Hanging on too long What was a good investment when you first bought it may not be a good investment today. The financial world is in a constant state of flux, so it's important to establish rules to guide your selling strategy. The psychological urge to hold on to what you already own can be harmful when it comes to your investments. 2. Failing to have an investment plan Designing a sound investment plan and sticking to it through the inevitable ups and downs of market conditions may not be the most exciting approach to money manage- ment. But in the long run, it's more likely the most profitable. Your situation is unique. Your investment plan should be designed to suit your personal goals and your own tolerance for risk. For example, your primary goal may be to provide you and your family with a financially secure retirement. Or you may want to accumulate enough money to put a child through college. On a personal level, you may be financially conservative with little taste for risk. On the other hand, you may feel in- vestments with a little risk attached are the best way to reach your goals. Also, your age is an important factor. Are you in your 30s, or in your 50s or 60s? For more information about investment planning, see the sidebar. 3. Paying too much attention to financial experts Chances are your mail often includes pitches for invest- ment newsletters that promise to make you rich. Get real. If anyone had a surefire way of getting rich in the stock market, would they be likely to offer it to the world for $99 a year? Of course not. No, they'd make millions and keep it to themselves instead of hawking newsletter subscriptions. (Haven't you thought the same thing?) 4. Failing to monitor investment fees Almost every investment has a cost. Each time you buy or sell a stock or bond through a broker, you pay a commission. When you buy a mutual fund, a fund management fee must be paid. Equally important, you should stay away from mutual funds that have a sales charge called a "load." The load may be imposed as a sales charge when you buy the fund or a redemption charge imposed when you go to sell the fund. Either way, you will be paying a fee that contributes nothing to the likelihood of achieving your financial goals. Always make certain the mutual fund you are buying is a "no-load" fund. Past studies have shown load funds have no performance advantage over no-load funds. While it's easy to ignore these often "hidden" costs, every dollar paid out in investment fees is a dollar removed from your investment portfolio . . . forever. Be constantly aware what you are paying in investment costs. Do what you can to minimize them. These fees can make a big difference in your financial well-being. You should shop for mutual funds with lower management fees and use an online discount broker instead of a full-service broker. These days, even your bank is getting a piece of your pie. Most banks are experimenting with new fees—to improve their own performance. That's why it's important to review your bank statements carefully each month to make sure you're not paying a fee you're not even aware of. 5. Failing to take full advantage of tax deferral 401(k), IRA, and other similar tax-deferred retirement plans offer the opportunity to stash away money shielded from Uncle Sam's grasp until you reach age 70½. Choosing not to make the maximum allowable deposit into one of these accounts each year can be a costly mistake. WILLIAM J. LYNOTT YOUR MONEY AVOIDING SOME OTHER MISTAKES Seven more investing mistakes you should sidestep. 56 October 2015 WWJ waterwelljournal.com Every dollar paid out in investment fees is a dollar removed from your investment portfolio . . . forever.