Investing mistakes you’re probably making
Successful investing is about controlling what you can
How many mistakes can you make investing? There are so many ways to lose money investing in stocks and even bonds. It’s hard to say what is the single biggest mistake. One basic fact about investing is that, losses are usually hard to predict in advance.
Certified financial planner, Paul Philip, president of Don Mills, a U S-based Financial Wealth Builders Inc., believes the biggest mistake investors make is being ‘predictably irrational.’
“We are emotional beings and are affected continually by the news around us. Most investors react exactly the opposite to what they should do when their investments inevitably fluctuate. They sell when the prices of their shares drop. They are frustrated and upset, then eventually they get their confidence back and buy when the market has already recovered.
“To such people, fear and greed are their overriding decision-makers. Dumping and buying shares as the prices fall and rise are not good for long-term well-being. Too many people live their investing lives like hamsters on a wheel, running faster and faster and getting nowhere.
“Successful investing is about controlling what you can. You can’t control what the market does, but you can control what you do in response.”
Continuing, he explained: “In my experience, a person’s returns depend less on whether they pick great investments than on whether they can manage their emotions.”
Patrick McKeough, Toronto-based publisher of The Successful Investor, The Wall Street Forecaster and the TSInetwork.ca, observed that another mistake that investors make is chasing stocks in the broker/media spotlight.
“Our basic rule is to downplay or avoid stocks in the broker/media spotlight unless it’s a really good idea,” he cautioned.
McKeough revealed that he rarely recommends buying new issues. An exception is Google, which he didn’t recommend until a few years after its IPO, but is one “I do like even though it’s been in the limelight.”
Sandy Cardy, formerly a tax and estate planning specialist for
Mackenzie Financial Corp, and now an independent consultant, believes the single biggest risk in investing is “the inability to understand and define your own risk tolerance in the face of volatility.”
According to him, investors can fill out forms and complete risk-tolerance questionnaires but it’s only in the heat of an actual bear market that most investors discover their true risk tolerance.
Cardy says she believes a good financial advisor is necessary for most investors because, according to her, without financial advisor’s guidance, investors are apt to fall prey to mistakes like not being properly diversified.
Culled from MoneySense.com
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