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Investing mistakes to avoid

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Amazingly we often see the same investment mistakes over and over again. This slide presentation provides a quick overview of some of the more common mistakes and a few suggestions for avoiding them.

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Investing mistakes to avoid

  1. 1. Investing Mistakes to Avoid Ideas for the investor
  2. 2. Author: Dr. James Spruell  James Spruell, Ph.D. is an author, educator, consultant, and featured/invited speaker.  His speaking engagements have taken him across the globe from Kansas City to Melbourne.  His vast consulting experience provides unique insight into the real life problems faced by so many. discuss.jspruell.com
  3. 3. Legal Ease  The contents of this presentation are intended for discussion purposes only  Review with your financial advisor any ideas for their suitability of your personal situation discuss.jspruell.com
  4. 4. Not Knowing Your Risk Tolerance  Investment has risks – know your tolerance level.  Risk tolerance assessments to estimate your tolerance level are available (try google…)  Understand the impact of an investment gone south  Ask yourself how would this affect my immediate, long term, retirement plans  And is it still a good investment for me… discuss.jspruell.com
  5. 5. The Blind Side  Over confidence in our own abilities, experiences;  We are sure we can pick a bottom, catch a falling knife, or just know that Company ABC is the next great winner;  Can be a factor in trading too frequently;  Falling in love with a company – the company may be great but for a variety of reasons my not be a good investment  Suggestion:  Avoid basing an investment decision on picking the bottom, catching a falling knife, etc.  Do plan a regular review/rebalance of your portfolio and strategy appropriate for your investment goals (and yes, review these with your investment advisor! discuss.jspruell.com
  6. 6. Diversity, Diversity, Diversity  Failing to diversity can be fatal;  Returns can be really good …for awhile, …then came the Dot.com bust…  Choosing two stocks that are highly correlated is not diversity  Make sure that you understand the industry you are investing in, e.g. be careful about investing in commodities unless you/your advisor understands how commodities work  Suggestion:  Using indexed funds, ETF’s as a portion of your portfolio can help, e.g., SPY is a basket of stocks matching the S&P and provides a natural diversity  Decide on what portion of your portfolio should be in bonds (Treasury or Corporate), cash, real estate, municipal bonds, etc. discuss.jspruell.com
  7. 7. Regret Avoidance  Holding on to an investment when the market, underlying industry, has changed substantially  Pride can be an awful thing in finance, and the cold market can relieve us rather quickly of the burden of investing when we hold on to stocks that have clearly gone south. It's a sunk cost, and the sell button must catch up with the pride button!  While the market at the end of 2017 was at all time highs, does not mean that stock purchased in 2000 was…  Suggestion:  When you realize a mistake has been made, the underlying industry has changed, etc. make the change. Again, this is where a regular scheduled portfolio rebalance has value along with a good financial advisor. discuss.jspruell.com
  8. 8. Attempting to Time the Market  Market Volatility is built in  Attempting to time the daily, short term Market swings, etc. is extremely difficult in a market of professional traders, algorithms,…  Periods of structural problems, e.g., the dot.com, liquidity crunch of 2008 is not a random fluctuation but is also fairly rare  Suggestion:  A regular scheduled portfolio rebalance along with a good financial advisor can help you spot the difference; The decision is yours but those structural problems are infrequent and often not very visible.  Almost always a long term investment plan will win out! discuss.jspruell.com
  9. 9. Not Having a Plan  ‘Ya gotta know where you want to go!  Plan for your future to meet your goals, expectations risk tolerance, and asset allocation decisions,…  Doing nothing is not a plan  Not keeping your plan up to date or doing due diligence  Suggestion:  Set a regular review of your plan and update it as necessary.  Don’t over rely on a financial advisor – it’s your future and plan! discuss.jspruell.com
  10. 10. A Written version is available at http://financial-dreams.blogspot.com/ discuss.jspruell.com Happy Investing!

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