|New York - With today's markets as volatile as ever, investors should ensure that
their portfolios are designed to avoid the following common mistakes:
- Not enough emergency or contingency funds
- Prior to investing, make sure you have enough liquid funds to meet emergencies or other
quick cash needs. The general rule of thumb that you should keep four to six months worth
of living expenses in readily available cash may not be sufficient if your job may be at
risk or you or a family member has poor health. Each individual should consider their own
- Not having adequate insurance before investing -
Prior to investing, you should ensure that you have adequate life insurance and disability
insurance should something unfortunate happen.
- Poor Use of Tax-Deferred Accounts
Investors need to ensure they maximize use of their tax-deferred accounts such as
Individual Retirement Accounts or Keoghs. Do not place tax-favored investments such as
municipal bonds in an IRA. Rather, you should consider placing dividend paying stocks in
- Listening to friends who know nothing - We
come across too many instances where investors take the advice of a friend because they
always seem to know what is going on. Ask to see your friend's investment statements
before investing or just nod your head yes the next time your friend suggests something.
Then call us.
- Purchasing investments just because they
are "high-yield" - Do not invest in dividend paying stocks
simply because the dividend yield is high. High dividend yields or bond yields generally
indicate riskier investments that may not be appropriate for your specific risk profile.
In addition, the dividend or income that is producing the yield may not paid in the
- Not selling poor investments - Do not hold on to
an investment under the belief that it will "come back." By not selling poor
investments and re-investing the proceeds, you forgo the higher rates of return that the
market may be rewarding other investors.
- Not selling profitable investments - Investors
generally find it difficult to sell. Do not get caught with an aggressive and profitable
investment when the market or stock turns ugly. You will find that 9 out of 10 times you
will lose much of your profit.
- Owning too many mutual funds - Be careful
not to own too many mutual funds. Generally, if you own more than 10 different mutual
funds, you have created an overlaps whereby your mutual funds probably own the same
stocks; hence, your portfolio is more concentrated than you think.
- No regular investment schedule - Although it may
seem admirable to invest a lump sum of money in the stock market, it is better to invest
set dollar amounts over periods of time to avoid timing the market.
- Investing large amounts in mutual funds in December
- Many mutual funds distribute year- to-date capital gains to investors in the month of
December. Hence, if you invest money in a mutual fund during this month, you realize
immediate taxable income without increasing the value of your shares.
Adviser Corporation is a 100% Independent and 100% Objective Financial
Advisory Firm that writes buy-side investment research. Our network of
independent Fee-Only Financial Advisers serves individuals, families and
businesses. They provide financial planning services, tax advice and offer
professionally managed asset accounts. They do not underwrite corporate
securities nor do they sell any proprietary products. To find out more or
get a FREE consultation Ask
An independent Fee-Only
Financial Adviser can help you
avoid portfolio mistakes.
Got an investment question?
Open a professionally
- Brokerage Accounts
- Traditional IRAs
- Roth IRAs
- 401(k) IRA Rollovers
- 403(b) IRA Rollovers
- College Savings
- Retirement Savings
for our Top Ten Investment Picks
Financial Advisory Services
401(k) Rollover Assistance