nvestment Traps to Avoid

Investing Traps to Avoid

If you are an investor, you may feel like you have a target on your back. Everyone from sales people to talking heads are aiming to either sway your opinions or cash in your chips. Here are a few classic, yet tempting, lines of thinking that you should endeavor to avoid which have the power to upend a great portfolio..

“I can predict the future” – this mindset can often sound like this: “I have a proven system for picking winning stocks”, “That sector will continue advancing through next year”. Basing investment decisions on predicting the future runs the risk of transforming investing into speculating.

Acting on impulse – have you heard someone say this: “I can’t take this bear market – I’m getting out!” or “Everyone’s making money – I want a piece of the action.” If you are tempted in this way, sleep on it and call a trusted professional!

Betting on “tips and hunches” – this line of thinking often sounds like this: “My friend works in the industry, I’d better get out.”, or “I heard it on cable news…I’d better sell!” Again, if you take some time for your decision and seek additional advice from a trusted professional, you will make a more informed choice that you will feel better about long-term.

Being swayed by the media – Classic inflammatory headlines that are hard to ignore include: “The Death of Equities” (BusinessWeek, 08/13/1979), “The Crash of ’98 – Can the US Economy Hold Up?” (Fortune, 09/28/1998), “Retire Rich – A Simple Plan to Have It All” (Fortune, 08/16/1999), “How to Reach $1 Million” (Money, 08/2012).

You can find opinions on every side of an issue. Know what you believe and find resources that will support and educate you in your approach. If you need help, find that trusted professional that will keep you from acting impulsively.