We all learn from our own mistakes. But when you’re making critical decisions regarding your investments, any blunder can have serious consequences on your financial future.
Here are some mistakes even the smartest people make — and some proactive steps to guard against them.
Going off-plan.
Altering your investment portfolio based on yesterday’s top performer or today’s daily news may end up hurting investment returns.
It is important to develop a long-term investment plan and stay the course in order to reach your financial goals. This plan should be designed to provide a clear roadmap for achieving a range of needs and goals.
Letting your emotions take over your decisions.
The ability to stick with a consistent investment strategy is often jeopardized by fear, greed, and nervousness.
While the financial markets rise and fall without warning, soaring one day and dropping the next, it is vital to stay focused on your long-term investment plan.
Being unaware of how taxes affect your returns.
Be aware of your tax bracket and how tax consequences impact your total investment return.
Changing your strategy due to interest rates.
Interest rates have been held at historic lows since 2008, a move by the Federal Reserve to push down the cost of borrowing and spark economic growth. The Fed has indicated that short-term interest rates will likely increase this year, which could cause short-term stock market volatility and depress bond prices, as rising interest rates tend to push bond prices lower.
Despite these coming changes, do not overreact to market volatility. Higher interest rates should not alter your long-term investment strategy if your assets are invested in diversely stocks.
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