Filed under: Personal Finance, Lynnette Khalfani-Cox
Since the year 2000, trillions of dollars have evaporated in the stock market. The bond market, long viewed as a "safe haven" during economic downturns, has also shed billions of dollars over the past decade. This collective loss of wealth serves as a sobering reminder that successful investing requires more than luck, unbridled optimism, or even a penchant for spotting hot companies. Successful investing requires - above all else - the ability to steer clear of the pitfalls present at every phase of the investing process.
A famous and really smart investor, Charles Schwab, once told me that a key to being a successful investor was not simply to buy winners and pick the right investments, but most importantly to avoid making investment mistakes. Mr. Schwab later wrote the foreword to my book, Investing Success: How to Conquer 30 Costly Mistakes and Multiply Your Wealth. He also candidly acknowledged to me: "I've made enough investing mistakes to fill three books."
Not many people, especially experts and financial services professionals, have the courage to fess up to their past missteps. That's why I've always appreciated the legendary Mr. Schwab's candor, and loved his advice about the importance of avoiding or fixing investing mistakes. So if you're currently invested in the financial markets -- through mutual funds, participation in 401(k) plans, or direct ownership of stocks, bonds and other securities -- here is an easy-to-follow, two-step blueprint to making smarter investing decisions.
Step 1: Recognize that investing involves a five-phase process:
* STRATEGIZING to meet your goals and objectives
* BUYING the right investments for your particular needs
* HOLDING/MONITORING the investments in your portfolio
* SELLING investments properly (i.e. at the right time, for the right reason, and in a tax efficient manner); and
* DEALING with financial advisors or other investment intermediaries
Step 2: Try to avoid the crucial investment blunders that can occur at each phase of the investing process
To thrive in both rising and declining markets, sidestep these 30 common investing mistakes that trip up so many investors:
STRATEGIC SLIP-UPS
Mistake #1: Failing to set specific, measurable and realistic investment goals
Mistake #2: Failing to have an overall asset allocation strategy
Mistake #3: Failing to invest consistently
Mistake #4: Not earmarking funds for designated goals
BUYING BLUNDERS
Mistake #5: Failing to establish buying criteria
Mistake #6: Relying on hunches, tips and "inside" information
Mistake #7: Chasing the latest hot performers
Mistake #8: Over-extending yourself
Mistake #9: Having concentrated wealth
Mistake #10: Failing to achieve true diversification
Mistake #11: Not paying attention to fees and commissions
Mistake #12: Becoming overconfident
HOLDING AND MONITORING MISHAPS
Mistake #13: Not monitoring your portfolio enough
Mistake #14: Having your assets spread out over too many accounts
Mistake #15: Failing to reassess and rebalance your portfolio as needed
Mistake #16: Failing to act when your personal situation has changed
SELLING SNAFUS
Mistake #17: Failing to have a predetermined sell strategy
Mistake #18: Failing to stick with your sell strategy
Mistake #19: Letting your emotions rule your decision-making process
Mistake #20: Refusing to admit you made a mistake and to move on
Mistake #21: Failing to take profits at the right time
Mistake #22: Over-trading
Mistake #23: Worrying too much about taxes
Mistake #24: Not taking taxes into consideration at all
FINANCIAL ADVISOR FOUL-UPS
Mistake #25: Relying too heavily on Wall Street analysts
Mistake #26: Neglecting to check your broker or financial planner's history
Mistake #27: Not firing a broker when necessary
Mistake #28: Being dishonest or giving your advisors incomplete information
Mistake #29: Taking an advisor's recommendations on blind faith
Mistake #30: Not holding brokers accountable if they do something illegal
Are you guilty of having made any of these mistakes? In Investing Success, I explain these blunders in detail, and tell you how to avoid or fix each problem. Investing might seem complicated, but master of this list is a great first step toward building wealth through the stock market.
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has been featured in the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller 'Zero Debt: The Ultimate Guide to Financial Freedom.'