Ernst & Young's Personal Financial Planning Guide
Here are the ten big mistakes in investment:
- Buying tax-favored investments (e.g., municipal bonds, Series EE bonds) inside tax-advantaged vehicles (i.e.,IRAs, Keoghs)
- Failing to maintain a sufficient contingency fund
- Jumping on the bandwagon : The investment that all your friends are excited about may not be right for you.
- Misunderstanding the meaning of “high yield”: This doesn’t mean more interest income without any additional risk.
- Refusing to let go: Some securities will never “come back.” Even if they do, the rate of
return you receive in the meantime may not rival what you would have gotten on an alternative investment. - Focusing only on return
- Having too many eggs in one basket It’s important to diversify among different investment types (stocks, bonds, cash, international stocks, gold) as well as within those asset classes.
- Failing to implement your strategy in hard times: If your investment strategy calls for investing in a stock fund every month, do it even if you believe the stock market may decline next month.
- Timing the market: It doesn’t work—the opportunity cost of investing in cash investments tends to exceed market losses over time.
- Paying income tax on someone else’s capital gain