Ten Common Investment Errors: Stocks, Bonds, & Management – Investment mistakes happen for a multitude of reasons, including the fact that decisions are made under conditions of uncertainty that are irresponsibly downplayed by market gurus and institutional spokespersons.
Losing money on an investment may not be the result of a mistake, and not all mistakes result in monetary losses.
But errors occur when judgment is unduly influenced by emotions, when the basic principles of investing are misunderstood, and when misconceptions exist about how securities react to varying economic, political, and hysterical circumstances.
Avoid these ten common errors to improve your performance:
1. Investment decisions should be made within a clearly defined Investment Plan. Investing is a goal-orientated activity that should include considerations of time, risk-tolerance, and future income… think about where you are going before you start moving in what may be the wrong direction.
A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy, speculations.
2. The distinction between Asset Allocation and Diversification is often clouded. Asset Allocation is the planned division of the portfolio between Equity and Income securities. Diversification is a risk minimization strategy used to assure that the size of individual portfolio positions does not become excessive in terms of various measurements.
Neither are “hedges” against anything or Market Timing devices. Neither can be done with Mutual Funds or within a single Mutual Fund. Both are handled most easily using Cost Basis analysis as defined in the Working Capital Model.
Steve Selengut http://www.sancoservices.com http://www.valuestockbuylistprogram.com Professional Portfolio Management since 1979 Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”