Investing should be based on sound principles, but sometimes emotion overrules logic. Being aware of these financial pitfalls may help keep your investment strategy on track.
Unrealistic Investment Performance Expectations
It is human nature to expect your investments to perform well1. However, you can encounter cash flow problems if you base financial plans on unrealistic assumptions. How much do you expect your investments to earn? Make sure those expectations are in line with average returns from past years.
Chasing Performance and Overtrading
By the time you hear about a “hot” performing investment, it may have already put up its best numbers. Rather than hopping from one investment to another, devise an investment strategy based on your financial goals, risk tolerance and timeframe. Chasing past winners is also closely related to overtrading. Shuffling investments too often may increase the chance you will buy high and sell low.
Not Revisiting Your Portfolio
When was the last time you checked your asset allocation?2 You might be surprised to find that strong (or weak) returns in one area may have caused a shift in your portfolio that could affect your ability to reach your investment goals. By reviewing your portfolio at least once a year with your financial advisor, you can ensure your portfolio remains in line with your investment objectives.
Investment mistakes happen, but you can – and should – minimize their impact. Meeting with a Fifth Third Bank financial advisor is a good place to start.