2. Top Ten Investment Blunders
#10 - Buying an Annuity in a Tax-Deferred Account
The benefit of an annuity is that your money grows
tax- deferred. But any investment you put inside an
IRA or 401(k) is automatically tax-deferred, so there
is no need to use an annuity inside of a plan that
already gives you tax- free growth.
3. Top Ten Investment Blunders
#9 – Losing Ground to Inflation
This is one of the cardinal sins of investing. No one
likes to lose money, but investors who park the bulk
of their assets in conservative investments, such as
money markets, rather than expose their portfolio
to the volatility of the stock market actually put
their future in greater risk: the very real likelihood
that their money will not grow at a pace that keeps
up with inflation.
4. Top Ten Investment Blunders
#8 - Thinking Indexing is a Low-Risk Strategy
Even with dividends reinvested, the S&P 500
declined 45% during the 2000 to 2002 bear
market. It has only recently recovered from
these losses.
5. Top Ten Investment Blunders
#7 – Holding Overlapping Positions
One word: Janus. When the tech bubble burst in
2000, many who help Janus funds (and had
overlapping positions) suffered huge losses.
6. Top Ten Investment Blunders
#6 – Taking Unnecessary Risks
When markets are rising, everyone wants to get
into the stock game. So rather than maintaining
a diversified balance of holdings, many investors
loaded up on tech-heavy mutual funds and their
losses were severe.
7. Top Ten Investment Blunders
#5 – Letting Emotions Guide Your Investment
Decisions
One of the most difficult tasks for investors is to
manage their emotions. Letting emotions drive
your investment decisions can lead to bad
decisions.
8. Top Ten Investment Blunders
#4 – Chasing Performance
Chasing performance is especially risky when
you try to make short-term gains in hot stock
sectors. For example, if you jumped into oil
stocks when they were performing best over the
past summer, you would have suffered
disproportionate losses during the fall.
9. Top Ten Investment Blunders
#3 – Pennywise and Pound Foolish on Fees
High expenses are a drag on performance but
the best of managers can overcome that
disadvantage.
10. Top Ten Investment Blunders
#2 – Ignoring Your Fund’s Manager
High expenses are a drag on performance but
the best of managers can overcome that
disadvantage.
11. Top Ten Investment Blunders
#1 – Unreasonable Expectations
Good investment managers help their clients
establish realistic expectations based on their
return requirements and risk tolerance.
Beware of any adviser who promises significantly
greater returns than those historical averages. If it
sounds too good to be true, it probably is.
