Making wise investment decisions is the first and most important step toward building a profitable investment portfolio, but habits of investors can undermine their efforts.
Certain patterns are all too easy to fall into, and they can lead to diminished returns. By knowing which bad habits to avoid, investors can keep those habits from sabotaging their long-term goals.
Investing is a long-range proposition, and it pays to be patient when wealth generation is the goal. However, many investors tend to focus on a mutual fund’s or stock’s recent performance, rather than its historical record, when determining whether it’s a smart buy.
By taking this risky approach, an investor can end up missing adequate returns in the quest for the ideal investment.
Many investors follow a pack mentality that’s particularly evident during chaotic markets. When the stock market declines sharply, investors often panic and sell assets without considering the sale’s effects on their portfolio.
Experienced investors don’t follow the herd because they realise the market has natural highs and lows. This method can be difficult, but it maximises the investor’s bottom line.
While fees are an unavoidable component of the investment process, there is no reason to pay more than necessary. Scanning a prospectus without reviewing expense ratios or trading stocks without considering brokers’ commissions are an easy way to see a smaller return.
Investors should ask about brokers’ fees before signing on, and they should carefully read accompanying literature.
Investing is not a static proposition. Occasionally, an investor must rebalance his or her portfolio to ensure a proper mix of assets. Keeping the same collection of stocks and bonds for years without reviewing performance can keep an investor from achieving their financial goals.
Eliminating bad financial habits can take patience and time, but it’s a worthwhile effort. No one ever gained anything by repeating a mistake, other than disappointment. To get results, investors must be willing to modify their approaches to avoid these detrimental behaviors.
With effective investment strategies, investors can break poor habits and achieve greater financial security.
Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant for over 36 years, a Financial Planner for over 18 years and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading), and operated his own Real Estate business for property investment clients for over 5 years as a second business.
Financial planning services provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.
Taxation & Accounting services provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, IPA & NTAA.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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