Managing Your Investments
Managing your investments is without a doubt, one of the most important parts of personal financial planning. It can also be one of the most difficult parts of it. After taking the careful steps to accumulate wealth, losing it to mismanagement would be a shame! Money management takes a combination of strategy, discipline, creativity and confidence. One of the reasons why so many people struggle with managing investments is the wide variety of choices available for investing. The available choices of where to place one's money can easily boggle your mind. With stocks, bonds, options, etfs all out there, how can you know which ones are right for you? Before jumping into where you should put your money, you first need to decide something much more important. That is, what your ASSET ALLOCATION will be. Your asset allocation will be the biggest factor in what kinds of returns your money will get. It's much more important that the specific investments you choose. Click HERE to determine what your asset allocation should be. Click on any of the links below to learn more about investments such as the best mutual funds, stocks, bonds, options, hedge funds, etfs, annuities and more, and how they can help you with your personal financial planning. Best Mutual Funds If you live in New Zealand, and need finance to help you on your way to financial freedom, Abacus Finance can help with a small personal loan. Apply online - no obligation application with fast decision times. Can YOU beat the market? Most people believe that they are intelligent enough, or maybe lucky enough to be able to outperform the stock market. Yet there are loads of research that show that most people, including professional money managers, DO NOT beat the market over time. In fact, quite the opposite is true. Most people severely under-perform the market over time. Why is that? There are a lot of reasons actually. Here are some of the main reasons:
Examining the flows into and out of mutual funds for the last 20 years, the DALBAR study of investor behavior found that market timers in stock mutual funds lost 3.29% per year on average. Over a period when the S&P grew by 12.98%, the average investor earned only 3.51%. While average investors did much better than market timers, they still underperformed the market by a long shot. “This finding is consistent with the well known behavior of investors to brag about their gains in stocks or mutual funds, but remain silent about losses” said Lou Harvey, DALBAR President. “The occasional money makers create the illusion that all timers are winners all the time. The fact is that most timers lose money most often and this data now confirms it.” So the next time your neighbor tells you about how much money he’s making on his last stock trade, just remember that he’s not telling you about the 10 previous trades where he lost his shirt. Study after study has found that time in the market is much better than timing the market.
This "herd" mentality can be extremely dangerous to your pocketbook and your personal financial plan. When the markets are roaring, extreme optimism prevails and no one wants to miss out on a good thing. When the markets are in the tank, nobody wants to own a dog, so everyone gets out. Toward the end of a big decline, the last bulls throw in the towel and sell with a vengeance. Studies by economists and psychologists have found that investors are most influenced by recent events --market news, political events, earnings, and so on-- and ignore long-term investment and economic fundamentals. Furthermore, if a movement starts in one direction, it tends to pick up more and more investors with time and momentum. The impact of this lemming-like behavior has been made worse in recent years because financial, economic, and other news affecting investor psychology travel faster than ever before. People constantly say, “Why is it that every time I buy something, it goes down? And when I sell something, it goes up?” It’s unbelievable how often this scenario occurs, even when you think you're buying the best mutual funds out there. One might say, then why don’t I just do the opposite of what everyone else is doing? If it were that easy, we’d all be multi-billionaires. The truth is, no one has that crystal ball to tell them when to get in or get out of the markets. A good personal financial planning professional who is worth his fee will help you to maintain a disciplined and diversified approach to reaching your goals. That advisor will more than pay for himself by helping you avoid costly market lessons. To learn more about the benefits of working with a professional money manager, click here. Go From Investments page back to Home page
|
1. Market Timing. This is one of the biggest personal financial planning enemies. It's the old buy low, sell high routine. Sounds so easy, right? "Just buy this software and you'll be able to retire in no time." Sound familiar? DALBAR, Inc., the nation's leading financial-services market research firm, showed in a recent study that market timers actually lose money instead of making healthy profits.
2. Emotional Investing. Many investors react to market conditions like lemmings: Stampeding up the high mountain when markets are rising and down into the cold deep sea when markets are falling! 
