Common Mistakes You Can Make Without a Financial Advisor

Common Mistakes You Can Make Without a Financial Advisor

Here's an informal list of mistakes investors can make by not using a financial advisor. See if any apply to you:

Getting emotional about your investments - Nobody likes to admit they made a mistake. So who's to know if that bowwow of a stock you bought at $30 and has since fallen to $5 is swept under the rug? Or who's to argue that it won't bounce back? I hate to keep picking on the Enron shareholders, but that's exactly what happened to them. First, they watched in disbelief as the stocks began sinking. Then they engaged in a fatal case of wishful thinking by agreeing with those despicable company executives who placated investors by saying the company would weather the storm and rally the stock to new heights. Then the skunks upstairs went out and began dumping their own shares like crazy.

Picking the wrong asset allocation mix - It's much worse getting the allocation wrong than it is getting the stock picking wrong. As long as you've honed in on the correct asset class, like large-cap stocks or Treasury bonds, then you're 90 percent of the way home, as the historical evidence suggests. But if you pick the wrong asset class - see the oil industry in 1990 or small-cap growth stocks in 2000 for proof - you're really up against it.

Remaining on the sidelines when you need to be in the game - Things happen over the course of your life. People get married, get divorced, buy and sell houses, take and lose jobs. All of these events trigger equally significant financial shock waves that need to be dealt with. But too often people don't act when they should and wind up all the poorer because the financial framework they've established for themselves is old and creaky and inadequate for all the changes that have taken place in their lives.

THE 7 INVESTMENT RULES I FOLLOW TO SUCCEED.




Failing to take the future into account - Half of financial planning is preparing for what will happen to you down the road. When do you want to retire? When are your kids going to college? When do you want to." start that new freelance graphic design business you've always wanted? If you build a personal portfolio around your present financial circumstances and disregard your future financial circumstances, you're only decreasing your chances of meeting those future goals.

Again, a sharp financial advisor can help you avoid these pitfalls.