We all have some bad investing behaviors, but the people who can identify those behaviors and remedy them quickly have a better chance of achieving long-term financial success. Part of effective portfolio management is doing nothing at all sometimes, which can be difficult for some people who like to know what their investments are doing daily. Identifying bad investing behaviors is the first step in fixing them, and we’ve explained some common behaviors investors should know about.
It’s easy and natural to get emotional when your portfolio rises or drops significantly. Whether you’re a young investor or nearing retirement age, market volatility will impact your investments for better or worse. Being emotional is normal, but you have to be strong enough to not let them turn into making emotional decisions. Trust the portfolio management strategy you put in place and understand there will be peaks and valleys. Eliminate the emotional decisions and you’ll become a more successful investor.
Not Enough Diversification
Even the investors with high risk tolerances diversify their portfolios to some extent. Having a mix of various investment products is important in case market volatility strikes at the wrong time. Incorporating different bonds, stocks, and cash into your portfolio will protect you from losing everything without limiting your potential earnings much. As the saying goes, don’t put all of your eggs into one basket. This applies directly to investing as well.
Checking Investment Balances Too Often
Keeping an eye on your investments is important so you can remain involved with portfolio management. However, checking account balances daily, or even monthly, typically leads to thoughts about making adjustments one way or another. The best thing to do is to trust your strategy, set up automatic investment contributions, and don’t worry about checking anything regularly. You can peek in to look at trends once every quarter or twice a year, but anything more than that and you may begin making emotional decisions.
Being Impatient With Investments
Whenever you invest in anything, you have to have the mindset of living with it for the long-term unless there’s a specific circumstance where it makes sense to abandon it. Patience is required to achieve long-term investing success. And as easy as it is to say you’ll be patient through times of high market volatility, you have to back up those words when the time comes. Staying the course is sometimes the best action you can take, along with no more than annual portfolio management evaluations to ensure you’re still on the right track.
Sometimes investors think they are doing the right thing with their portfolios, but the opposite ends up being true. These bad investing behaviors seem harmless on the surface and likely won’t hurt you in the short-term. It’s the long-term ramifications that are difficult to see, but are very real. Stock Investing Info is here to help you understand successful investing behaviors to set you up for long-term success, so contact us at any time to speak with a representative.