“Groundhog Day” Investing Blunders

5 Mistakes Investors Repeat

“Groundhog Day” Investing Blunders
February 2, 2017

In the movie “Groundhog Day”, Bill Murray lives through the same day over and over again. Some investors sympathize with this feeling, as they make the same mistake every year and never learn their lesson.

Are you guilty of one of the following frequent financial fallacies?

  1. Procrastinating on a Plan – You put off increasing your 401(k) contributions, establishing IRAs, planning and establishing a balanced investment portfolio – until one day you are handed a plaque for years of service and whisked off to retirement. Where did the time go?

    It is hard to catch up when you do not start early. Make your plan, create an investment portfolio, and review it at least annually to make sure your investments are in line with your goals.

    If you do not invest with a plan, you are leaving your retirement funds to random chance. Do not spin the big retirement “Wheel of Fortune” and hope you land on a favorable spot. You could end up on “Bankrupt”.

  2. Trying to Time the Market – Are you constantly chasing hot stock tips? Do drops in the market cause you to bail out and return later at a higher price? If so, you are subsidizing the rest of us with your losses.

    Unless you are one of the very few people with incredible acumen and the resources to time the market accurately (Hint: you aren’t), chasing phantom high returns and/or constantly popping in and out of the market drains your wealth through excessive fees and lost opportunity costs.

    Our advice is the same as before – construct a balanced portfolio, review it, and adjust to meet current needs. Avoid trends and herd mentality. If you cannot lead the herd, don’t be in the herd at all.

  3. Being Too Conservative – Some investors have difficulty with stock market volatility, and cannot understand that the stock market yields superior returns over the long-term.

    If you cannot deal with any risk, that is your choice – but understand that simple bank accounts, CDs, and T-bills do not build wealth, and often do not keep up with inflation. Failure to diversify with equities or other risk-bearing and higher-return financial vehicles means accepting a relatively small pool of retirement funds and lesser purchasing power.

  4. Underestimating Retirement Needs – Have you ever heard a retired individual say, “I wish I hadn’t saved all of this money for my retirement. I’ll never be able to spend it all?” Probably not, but it is likely you have heard complaints from seniors about not saving enough.

    People routinely underestimate how long they will live, and the health care costs required for their retirement years. Seek the help of a professional for objective advice on your specific retirement needs.

  5. Paying High Fees – It is easy to get caught up in overall market prices and trends without evaluating how much you are paying in investment fees. Trading/brokerage fees can wipe out the gains of amateur market timers, even if they are moderately successful.

    Actively managed funds require higher costs than passively managed ones. If your actively managed fund is underperforming compared to its benchmark (as many do), you may want to consider a passively managed index fund with lower fees and better performance.

    The key is always to consider fees when you are making investment decisions. They are rarely trivial.

If you recognize yourself in one of these habits, do your best to change it this year. Get out of your rut before the real Groundhog Day comes along.


Photo ©iStock.com/toos

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