Are you making these common investing errors?
Successful investing isn't always about how much money you make. It’s often about how much you keep.
Keeping losses to a minimum allows your assets the potential to grow over time through compounding.
Unfortunately, some investors make decisions that cause their portfolios to lose value or that hinder growth of their assets.
Here are four common investing errors you can avoid:
1. Putting all your eggs you-know-where
Everyone knows the adage about putting all your eggs in one basket. So why invest all your assets in only one fund or security – and hope its value rockets? If that lone investment tanks, your portfolio could be scrambled.
Instead, consider diversification. While this strategy doesn’t ensure a profit or guarantee you won’t lose money, you can better manage risk by spreading your assets among different investments and asset classes – stocks, bonds, cash instruments.
As some assets fall in value, others may rise or hold steady and help offset the losses.
2. Trying to time the market
It goes like this: Stay fully invested in stock funds, while the stock market is rising, then jump quickly into money market* or cash equivalents just before stock values begin to fall.
Interesting, but not historically effective for most of even the savviest investors. Even they can't consistently time the market. For the strategy to work, they must know precisely when to get out of stocks and precisely when to buy back into them – always.
If you build a portfolio that meets your long-term goals and considers your risk tolerance, you can stay invested – even when the market is volatile.
3. Buying last year’s winners
Don’t expect last year’s top-performing funds or stocks to repeat year after year.
Too many factors can affect stock and bond funds in any given year: economic health, interest rates, consumer confidence, political issues and the like.
While there’s no guarantee history will repeat itself, don’t ignore a past-season winner that has steady performance and a fund manager with a consistently solid track record.
4. Thinking short term
Investing for the short term simply may not give your investments time to potentially grow. That’s particularly important if your goal is long-term – like funding your retirement or college education for your kids.
For long-term growth, many investment professionals say stocks are a portfolio essential.
There may be periods when their prices fall and your portfolio loses value. But five decades of research shows that stocks have consistently recovered from declines and have outperformed all other major asset classes.
Investing is not simple. Success is never guaranteed. And mistakes can be made along the way. But by staying alert and avoiding common investing errors, you increase your potential for long-term investment growth.
Be sure to talk to your investment professional about Nationwide products that could help you meet your long-term goals.
* An investment in a money market fund is not insured or
guaranteed by the FDIC or any other government agency. Although the money
market fund seeks to preserve the value of your investment at $1 per
share, it is possible to lose money by investing in the money market.
Investing may involve market risk, including possible loss of
**The S&P 500 Index is an unmanaged index that tracks the performance of the stocks of 500 major U.S. companies. Stocks, whose value will fluctuate with market conditions, represent shares of ownership in companies. Future returns may or may not be enough to overcome possible annual declines. Past performance does not guarantee future returns. Your investment returns will be different.