Whether you’re just beginning to build your investment portfolio or you’re a long-time investor, several mistakes may haunt DIY portfolio managers. Learn more about these mistakes and how to avoid them.
1. Forgetting Strategy
The Problem: One of the most basic problems DIY portfolio managers may face is forgetting to create and strategize a plan before diving into investments. Without a plan or strategy, it’s easy to lose track of your money, make rash investments, sell stocks too early or make decisions that don’t align with your ultimate goals.
The Solution: Astute financial planners take time to strategize before making any big moves. With portfolio management, the approach should be no different. First, ask yourself what you want to accomplish with your portfolio. Are you trying to supplement your retirement fund? Would you like to use the returns from your investments to reduce debt? Identify what you’re trying to achieve and use those goals as a starting point for your portfolio management strategy.
2. Following The Crowd
The Problem: Some DIY money managers fall into the trap of buying into or selling a stock because they’ve seen someone else make money with it. A common mistake is when investors prematurely sell stocks out of panic due to a lack of discipline or strategy. But just because a stock worked for someone else doesn’t mean it will work for you.
The Solution: Relying too heavily on someone else’s money management experiences can compromise your success. Everyone’s financial planning goals, money situations and investment strategies are different. Focus on your portfolio management plan and use that as the basis for your investment decisions.
3. Not Giving It Enough Time To Work
The Problem: So many people fall into the trap of touching their investments too much. Few DIY portfolio managers have enough time to be daily traders. Whether it’s moving investments around or selling too quickly, not giving your investments time to work typically costs you money.
The Solution: View your investing strategy as a marathon, not a sprint. With most investments, it’s better to leave them alone and let them perform for you.
4. Letting Emotions Rule
The Problem: Many DIY investors view their investments as a ticket to getting rich quick. When you see a stock fall or rise abruptly, it’s tempting to make a rash decision to buy or sell. However, relying on your emotions too heavily may lead to losing money.
The Solution: Don’t let your emotions impact your portfolio management decisions. This is another reason why it’s so important to develop a plan and goals before you invest. When you have a plan and can see the big picture, you’re more likely to make rational decisions aligned with your long-term goals.
5. Considering Cost Alone
The Problem: Don’t view cost alone as a threshold for success. Look for something beyond the lowest trading cost. If you’re hesitant to invest in a financial advisor due to the cost, rethink your strategy.
The Solution: If you’re afraid to partner with an advisor, you may miss out on higher levels of success. Consider the value of working with an advisor. The benefits often outweigh the nominal fees you may have to pay.
6. Not Getting Feedback
The Problem: Ultimately, when you self-manage your portfolio, you miss out on receiving impartial feedback that helps you form a well-rounded perspective.
The Solution: Talk with a professional portfolio manager and get advice about your plan, goals and investment strategy. Often, DIY portfolio managers don’t have enough time to research their next move or monitor their investments. An advisor works with you to develop clear plans and goals for your investments. With the right portfolio manager, you can balance the risks and rewards of investing to build a strong foundation for your portfolio.
Would you like to learn more about portfolio management and how to get the most out of your investments? Talk to a Richard Brothers financial professional to discover how you can secure your future with wise financial moves.
