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Don't Make These 10 Investment Mistakes

To err is human, but you do not want to make investment mistakes that cost you money. Unfortunately, there is no 100% foolproof method for making successful investments. At the very least, you can try to avoid common errors that plague other investors. Here are ten mistakes to watch out for.

Mistake #1: You act too quickly. If you are all too willing to jump on the bandwagon—no matter which direction it is heading in—you could end up losing money. Take enough time to carefully analyze your investment decisions and then act accordingly.

Mistake #2: You procrastinate. At the other end of the spectrum, you might miss the boat if you take too long to put your plans into action. This could result in missed opportunities for gains and missed chances to reduce or avoid losses. Once you have reached a well-reasoned decision, try to stick with it.

Mistake #3: You have no investment focus. If you take a scattergun approach to investing, at some point you will start missing your target or run out of ammunition. You have a better chance of succeeding (although there are no guarantees) if you develop a comprehensive plan designed to meet your objectives.

Mistake #4: You don't diversify. It cannot be said enough: Do not put all of your eggs into one basket. By spreading out your money, you reduce the risk of a financial catastrophe. (Once again, however, there are no guarantees.)

Mistake #5: You have not properly allocated your assets. Your portfolio may be too heavily weighted toward one investment classification or not weighted enough toward another. Make sure the allocation of assets matches your investment objectives.

Mistake #6: You underestimate your future needs. Do not assume that you will need substantially less income to live on in retirement. Instead, do a quick analysis of the income you expect to be receiving and the expenses you will be paying. You may find that you need to adjust your goals.

Mistake #7: You don't take taxes into account. When you are figuring what you expect to receive in income from taxable sources, do not forget that your earning power will be eroded by federal and state taxes.

Mistake #8: You overemphasize taxes. Do not let taxes become the be-all and end-all. Be sure to add taxes into the equation, but consider all the other relevant economic factors.

Mistake #9: You ignore the potential effects of inflation. As with taxes, inflation can erode any investment earnings you accumulate over time. If you ignore the impact of inflation—even at relatively low rates—you may end up with a shortfall during your retirement years.

Mistake #10: You don't review your portfolio. No matter how carefully you have analyzed your investment choices, changing economic conditions and other new developments will require you to review your portfolio on a periodic basis. You cannot simply leave well enough alone.

Finally, one of the worst mistakes you can make is to go it alone. Obtain advice from qualified professional advisers.

 

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