Top 10 Investment Blunders

Top Ten Investment Blunders

And tips to help…


#10 - Buying an Annuity in a Tax-Deferred Account

The benefit of an annuity is that your money grows tax- deferred. But any investment you put inside an IRA or 401(k) is automatically tax-deferred, so there is no need to use an annuity inside of a plan that already gives you tax- free growth.


#9 – Losing Ground to Inflation

This is one of the cardinal sins of investing. No one likes to lose money, but investors who park the bulk of their assets in conservative investments, such as money markets, rather than expose their portfolio to the volatility of the stock market actually put their future in greater risk: the very real likelihood that their money will not grow at a pace that keeps up with inflation.


#8 - Thinking Indexing is a Low-Risk Strategy

Even with dividends reinvested, the S&P 500 declined 45% during the 2000 to 2002 bear market. It has only recently recovered from these losses.


#7 – Holding Overlapping Positions

One word: Janus. When the tech bubble burst in 2000, many who help Janus funds (and had overlapping positions) suffered huge losses.


#6 – Taking Unnecessary Risks

When markets are rising, everyone wants to get into the stock game. So rather than maintaining a diversified balance of holdings, many investors loaded up on tech-heavy mutual funds and their losses were severe.


#5 – Letting Emotions Guide Your Investment Decisions

One of the most difficult tasks for investors is to manage their emotions. Letting emotions drive your investment decisions can lead to bad decisions.


#4 – Chasing Performance

Chasing performance is especially risky when you try to make short-term gains in hot stock sectors. For example, if you jumped into oil stocks when they were performing best over the past summer, you would have suffered disproportionate losses during the fall.


#3 – Pennywise and Pound Foolish on Fees

High expenses are a drag on performance but the best of managers can overcome that disadvantage.


#2 – Ignoring Your Fund’s Manager

High expenses are a drag on performance but the best of managers can overcome that disadvantage.


#1 – Unreasonable Expectations

Good investment managers help their clients establish realistic expectations based on their return requirements and risk tolerance.

Beware of any adviser who promises significantly greater returns than those historical averages. If it sounds too good to be true, it probably is.

Economy & Finance

Top 10 Investment Blunders