I know what you’re saying — ‘when would you ever want to make an investing mistake?’. Well, the truth is some honest advice is more difficult to process and stick to in times of market peril.
It’s like that time you were in a bit of ‘drought’ and when you were just about to go for some boob grabbage on that hot chick at your dorm, you puked on her shirt and ruined the whole deal. Disaster.
Bankrate.com, a solid and objective personal finance/investing site, has got you covered on the investing advice, but nothing to report on ‘stealing 2nd base’ tips unfortunately. They put together a good list of 6 Deadly Investing Mistakes you can make in this market. Although none of them are literally ‘deadly’, it is a pretty badass-sounding title.
Of course, a lot of this might be common sense, but trying to explain anything stock market/investing related with ‘common sense’ has always been an uphill battle.
We’ve given Bankrate’s 6 Biggest Mistakes some thought:
1. Panicking over market fluctuations – Dude, chill out. Don’t go thinking this ‘recession’ is really the Depression. You won’t be living in Hooverville anytime soon. I assure you.
2. Reacting to daily economic reports – Erin Burnett, Liz Claman and the rest of the foxy business/biz babe ladies are the best thing since sliced bread, without argument. But everyday they’re just talking about the next big number to get you to tune in and overreact. Many people agree the best advice is to hang in there with a good company and let your money do the moving.
3. Turning off your buying during a downturn – Everyone is selling right now and although it might be tough to get your head in the game during all the fears and jitters, a little thing called ‘dollar cost averaging‘ can help you spend a fixed amount. This adds up to more shares in a downturn and less when prices are high.
4. Trying to time the market – It might not be fun or exciting to avoid, but trying to buy and sell stocks at their peaks and valleys is a tough game that many end up losing. Why not just pick something with sound fundamentals? If you’d reply, "Cuz chicks dig scars!". Then whatever, suit yourself, man. Don’t say I didn’t warn you.
5. Not maintaining an appropriate asset allocation – Asset allocation refers to how you divvy up your investments between stocks, bonds, cash, loans, etc. A big mistake you might fall into is trying to mix up your diversification amounts in times of a downturn. This goes back to the ‘overreacting to news’ point, but still, it holds steady for your fixed proportions as well.
Weigh in with any other pitfalls you’ve learned to avoid throughout your investing career.