Preventing Investment Mistakes: Ten Risk Minimizers

Most investment errors are caused by misunderstanding of basic equity markets invalid and performance expectations. Markets move in totally unpredictable cyclical patterns of varying length and breadth. To assess the performance of the two major classes of investment securities to be made separately, because they belong to different purposes. Bolsa capital investment is expected to deliver realized capital gains, income producing investments are expected to generate cash flow.

Losing money on an investment can not be the result of an investment mistake, and not all mistakes result in monetary losses. But errors occur more frequently when the sentence is unduly influenced by emotions such as fear and greed, hindsightful observations, and short-term market value comparisons unrelated to the numbers. His own misconceptions about how to react to different values economic, political, and hysterical circumstances are its most cruel enemy.

Master these ten risk-minimizers to improve its long-term investment performance:

1. Develop an investment plan. Identify realistic goals that include considerations of time, risk tolerance, and future income requirements --- think of where you are going before you start moving in the wrong direction. A well thought out plan does not require frequent adjustments. A well-managed plan will not be susceptible to the addition of fashion speculation.

2. Learn to distinguish between the diversification and asset allocation decisions. The asset allocation portfolio divided between equity and income securities. Diversification is a strategy which limits the size of each portfolio holdings in at least three different ways. Neither is a hedge, or a market timing devices. Neither can be done precisely with mutual funds, and both are handled more efficiently by using an approach to cost basis, as the Working Capital Model.

3. Be patient with your plan. Although investing is always referred to as long-term, is rarely treated as such by investors, the media, or financial advisors. Never change direction frequently, and always gradual rather than drastic adjustments. In the short term the market value movements should not be compared with the United Nations related to the portfolio of indexes and averages. There is an index that compares with your portfolio, and the timing sub-divisions have no relationship whatever the market, interest rates or economic cycles.

4. Never fall in love with a guarantee, especially when the company was once her employer. It 's alarming how often accounting and other professionals refuse to fix the outcome of a single item portfolios. Apart from the question of love, this becomes an unwilling to pay the taxes problem that often brings the unrealized gain on Schedule D, in reality the loss. Non-profit, either in classes of securities, should not be ever. A target profit should be established as part of its plan.

5. Preventing the "paralysis of analysis" short-circuit its decision-making power. An overdose of information cause confusion, in hindsight, the inability to distinguish between research and sales materials --- very often the same document. A little limited in the information that supports a logical and well-documented investment strategy will be more productive in the long run. Avoid future predictors.

6. Record, erase, throw out the window any shortcuts or tricks that are supposed to requirements for stock picking success with minimal effort. Do not let your portfolio becomes a hodgepodge of investment funds, index ETFs, associations, pence, hedges, shorts, bands, metals, grains, options, currencies, etc. of consumers with products obsession underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: consumers buy products; selecting securities investors.

7. Attend a seminar on expectations of interest rates (IRE) values and learn to deal appropriately sensitive to changes in market value --- in any direction. The earnings on your portfolio should be viewed separately from the growth portion. Line below market value, changes must wait and belief, did not react with any fear or greed. From debt does not mean fixed price. Few investors never realize (in either sense) the full power of this part of his portfolio.

8. Ignore Mother Nature 's evil twin daughters, speculation and pessimism. They with you in buying surge in the market and panic when prices fall, ignoring the cyclical opportunities offered Momma. Never buy at all times high prices or the overloading of the portfolio with existing stocks of history. Buy good companies, gradually, to lower prices and avoid the kind of investor 's buy high, sell low frustration.

9. Step away from calendar year, the market value of thinking. Most mistakes involve investment horizon realistic, and / or oranges with apples "comparisons of performance. The make you rich slowly path is an investment more reliable road that Wall Street has allowed to become too much, if not abandoned. Portfolio growth is rarely a straight up arrow and comparisons with short-term rates are unrelated, with an average of strategies or simply produce detours that speed progress away from original portfolio goals.

10. Avoid cheap, easy, confusion, the most popular, knowing the future, and one size fits all. No gifts or sure things on Wall Street, and you lost more conventional stocks and bonds, the more risk you are adding to their portfolio. When cheap is an investor 's main concern, what he gets is usually worth the price.

Compounding the problems that investors are faced with managing their investment portfolios is the sensationalism of the media that contributes to the process. Step away from calendar year, the market value of thinking. The investment is a personal project where individual and family goals and objectives must dictate portfolio structure, management strategy, and performance assessment techniques.

Is Most individual investors have difficulty in an environment that encourages instant gratification, supports all forms of speculation, and would be shortsighted reports, reactions, and achievements? Yup.