Everyone makes mistakes; even Derek Jeter as noted in the picture to the right.
The deVere Group recently surveyed 880 millionaire investors around the world to determine their top investing mistakes.
The list is below, but these mistakes are made by everyone and not just millionaires.
- 23% – Failure to adequately diversify their portfolio. Do you have a large holding of one stock or a material amount of your assets in only the S&P 500? An adequately diversified portfolio should not only reduce your risk, but also increase returns if implemented effectively.
- 22% – Investing without a plan. Studies have shown that 52% of people with a plan are “very confident” about managing their money while only 30% are confident without a plan. Are you saving for retirement/college? How do you know whether it is enough or the right asset allocation. A plan is the first place to start.
- 20% – Making emotional decisions. In a market downturn, you won’t be the same investor you are today. Recent studies have shown that a moderate amount of sudden stress can make people more sensitive to losses and indifferent to small gains. What did you do with your portfolio in 2008/2009? Be careful to not let your emotions dictate your investment decisions.
- 16% – Failing to regularly review your portfolio. We recommend you review your portfolio quarterly, or at least once a year.
- 16% – Focusing too heavily on historical investment returns. Individual investors like chasing hot fads (e.g. technology stocks, real estate and gold), but the reality is yesterday’s losers could be tomorrow’s winners. You should focus less on historical returns and more on current valuations to determine future returns as noted by Vanguard.
Do you find yourself making these same mistakes or unsure about your investment strategy?
If yes, you are not the only one, as a recent Morningstar study has found that the average investor has trailed the funds they invest in by ~2.5% per year due to poor timing.
If you find yourself struggling with any of these items above, it may be time to work with Financial Symmetry. Furthermore, contact us to request our free whitepaper on keys to a successful investment strategy.
