FIVE INVESTMENT MISTAKES TO AVOID

red dice with words isolated on whiteManaging your investments can be perilous – ripe with opportunities to make a bad move. Everyone, from the pundits on the TV financial networks to your neighbor to your barber has the answer and “perfect” investment for you.

What’s the right thing to do with your money? Only hindsight is perfect, but here are some things to think about while you are deciding.

Timing the market – The eternal “Buy Low, Sell High” axiom sounds easy enough, right? But reality is very different. At the beginning of 2013, a budget crisis, pending government shutdown and a long-running bull market could have easily tempted you to jump out of stocks. A correction was surely imminent. And then? Oops, U.S. stocks surged more than 30%. The lesson? Don’t try to time the market. Among the challenges you’ll face is the need to make two decisions – when to get out and when to get back in. Can you get them both right? If so, can you do it more than once? Probably not. Don’t try to time the market, let your long-term money work for the long-term.

Picking off the top of the list – Its way too easy to look at last year’s winners and choose to jump on the bandwagon by shifting your money to whatever did best. Don’t do it! Remember our “Buy Low, Sell High” axiom. Maybe last year’s winner will go even higher. Or maybe it won’t. Past behavior is only an indicator of the past, not necessarily the future. Typically, you’ll arrive at the party just in time for a big disappointment.

Hitting for a home run – In 2013, if you owned Rite Aid stock, you would have seen a healthy 272% return. If you had bet on the goldmining stock Newmont Mining, you would have lost nearly half your investment. The point? For most people, broadbased mutual fund or exchangetraded fund investments make more sense than swinging for the fences…and the risk of striking out. Remember that a batting average of .300 in the big leagues will get you a multimillion dollar contract. In the stock market…

More isn’t always better – Everything in moderation. It’s a saying that works well in many aspects of life, and investing is no exception. Some gold, commodities or real estate might be a nice addition to your portfolio. However, like cayenne pepper in your favorite recipe, more is not necessarily better! A diversified portfolio should contain a mix of different investments but not wild bets on the latest trend.