Avoid Common Investing Mistakes

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Five Typical Challenges

Almost all of us have made investing mistakes. The key is not to make the same ones twice. These mistakes can directly affect whether or not you achieve your desired goals. By repeating even just one mistake,
individual investors can quickly become their own worst enemy. Below are some common investor errors and some suggestions on how to sidestep them.

Starting Too Late (forget this)
The most common mistake investors make is waiting too long to initiate a longterm investment plan. The earlier you can start the investment process, the more likely it is that the plan will succeed. Thanks to the power of compounding, a small amount of money, wisely invested early on, can turn into a large sum over time. So try to avoid procrastinating and start investing today.

Lack of Diversification (pay a little attention to this)
By investing all of your money into just one asset class, industry, or company, you are placing all of your eggs into one basket—and this can be extremely risky. For example, at year-end 2006, nearly 9% of 401(k) plan participants held more than 80% of their account balances in their own company’s stock (according to the Employee Benefit Research Institute). It is better to combine a variety of investments, such as stocks, bonds, and cash, all of which are unlikely to move in the same direction at the same time. Your portfolio’s risk exposure should be lessened as a result.

Lack of Research (pay attention to this)
No matter what type of investment you plan to make, be sure to conduct the proper research. It is unwise to allocate your money to an investment you do not understand. There are a number of helpful resources that you can explore—ranging from public information to professional advice. Take advantage of these resources.

Unrealistic Expectations (pay attention to this too)
Many investments require time to grow. Investors often become frustrated with the early performance of their investments, decide to sell too quickly, and move the proceeds into other investments. This could result in knee-jerk reactions leading to too much trading, which is not only expensive, but also usually unnecessary. It is important to maintain a long-term view and to not be distracted by short-term results.

Chasing Past Performance and Overreacting to Market Fluctuations (Bedlam Bingo!!)
Yesterday’s hot stocks or mutual funds can become tomorrow’s worst. A good number of investors buy assets when they have reached their peak only to watch their performance suffer. It may be a good idea to choose investments with a history of good performance as well as quality management. Employing a dollar cost averaging strategy, which involves the purchase of securities, such as shares of mutual funds, in fixed
dollar amounts at regular intervals, can also be helpful. This strategy is maintained no matter what direction the market is moving and typically results in the investor being able to purchase more shares when prices are lower, and fewer shares when prices are higher, with the average price paid for each share obtained falling
somewhere in between.

This is always the fine print
Investors should consider the investment objectives, risks and charges of the Investment Company carefully before investing.
Take care, BEDLAM