top of page

Investing Mistakes | The Unlucky Seven

  • Writer: Allen Minassian
    Allen Minassian
  • Mar 31, 2015
  • 2 min read

Before I sat down to write this article, I compiled a list of dozens of mistakes I have either read about or seen investors make in the 22 years I have been a financial planner. I wish I had the space to share every single one of them with you.

I narrowed my list down to what I feel are the top seven or as I like to call them “the unlucky 7”.


Chasing Performance

Statisticians will tell you that it takes many years to distinguish luck from skill. Nevertheless, some investors are swayed by a short term hot streak. In all likelihood, truly outstanding performance is very difficult to replicate since the conditions that helped generate that performance rarely repeat themselves. Every year presents different challenges and opportunities than the previous one.


Overreacting to Short-term Events

I have talked about this for years. Many investors talk long-term, but act short term. The result is often damage to the integrity of a long-term financial plan and the purchase or sale of an investment at the worst possible time.


Failure to Consider a Comprehensive Financial Plan

Many investors get caught up in considering each of their investments individually or in isolation. A comprehensive plan can help reduce risk, help maximize diversification, and stand the test of time.


Desiring Absolute Returns during Bad Times and Relative Returns during Good Times

Although it would be wonderful to find a manager that always outperforms, in reality that rarely happens. Even Managers who deliver consistent returns with low risk cannot always outperform the market. It is very unrealistic to expect a manager to return 40% during a bull market and lose nothing during a bear market. The answer has always been the same, Diversification.


Hindsight Bias

Consider the following portfolio from 2007. Washington Mutual, Wachovia, Ford, and GM. Investing in these “admired” companies would have turned out to be a disaster in subsequent years. The key point here is that making an investment decision in a real-time setting is very difficult. Nevertheless, many investors assume, after the fact that an investment outcome (e.g., the crash of 2008/2009) should have been obvious at the time the decision was made.


Holding onto Losing Investments too Long

Many investors refuse to sell a losing investment to avoid turning a mistake into a loss. In some cases, realizing a capital loss is the wise thing to do.


Selling Winning Investments too Soon

Imagine purchasing Microsoft in 1986, only to sell it in 1987 for a moderate gain. As long as your fundamentals and goals have not changed, selling an investment early could have a negative impact on the portfolio.


Comentarios


Two x's overlayed on top of one another to make a cube

Private Wealth Solutions LLC

26050 Mureau Road, Ste 103

Calabasas, CA 91302

T: 818-264-0600

F: 818-666-3519

lynn@privatewealthsolutions.com

Doug Lagerstrom and Allen Minassian are registered with and offer securities through Kovack Securities, Inc. Member FINRA/SIPC. 6451 North Federal Hwy, Suite 1201 Ft. Lauderdale, FL 33308 (954)782-4771. Investment Advisory services offered through Private Wealth Solutions, a registered investment advisor. Private Wealth Solutions is not affiliated with Kovack Securities, Inc. or Kovack Advisors, Inc. The Investment Adviser Representative of Private Wealth Solutions offers investment advice with residents of a SEC/jurisdiction for which they are properly registered or where excluded from registration requirements. Linked sites are strictly provided as a courtesy. Kovack Securities, Inc. does not guarantee, approve nor endorse the information or products available at the sites, nor do links indicate any association with or endorsement of the linked sites by Kovack Securities, Inc. nor Kovack Advisors, Inc.

bottom of page