Learn five common investing mistakes and ways to avoid making them.
Have you ever held onto a losing investment? If so, you’ve got plenty of company, according Millionaire Corner research identifying five common investing pitfalls and ways to avoid them.
More than half the investors surveyed by Millionaire Corner in December admitted to making a financial mistake exceeding $20,000. What types of mistakes were most commonly reported? Here’s a look:
· Holding on to losing investments: Thirty percent of investors attributed their loss to failing to sell an investment on the decline. Retirees appear the most loathe to sell a loser, while investors in their 40s are most likely to cut their losses. (Learn more about loss aversion by clicking here.)
· Emotional Investing: Roughly 17 percent of investors attributed their loss to investing based on fear or greed. Men and Millionaires are most likely to be swayed by emotion.
· Advice from a broker: Another 17 percent blame their loss on recommendations from a broker dealer. Younger investors, those under the age or 40, are more likely to blame their mistake on bad advice from a friend.
· Acting on instinct: Fifteen percent of investors blame their losses on their own failure to research financial products and market trends. Self-described aggressive investors are the most prone to acting impulsively.
· Following the crowd: A herd mentality led 14 percent of the investors to make a big financial mistake. Studies show that investors who join trends typically buy at market highs and sell at lows – a practice sure to lead to losses.
Investors also express a high level of regret over financial decisions concerning retirement.
Many of the investors appear to be wiser for their experiences. In hindsight, a significant share indicated they could have avoided their mistakes by researching industry and market trends, diversifying their portfolio or consulting with a financial professional before buying or selling investments.
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