The Five Worst Investment Mistakes You Can Make

PLANNING FOR YOUR FINANCIAL FUTURE

Mistake #1: You don’t have an exit strategy.

One of the worst mistakes you can make is not having an exit strategy. In other words, many people don’t have any idea of when to get out of an investment and end up losing more money than they accounted for. For example, if your investment is declining, you can buy more at a cheaper price, but this can backfire. By buying additional investments, you are throwing in money in anticipation of that investment going up, when it may not.

How do you decide?

It’s simple. Calculate your time horizon. If you have enough time on your side to make an investment, keep it in there and ride the downfall (we’re talking about 1-2 years), then you may decide to do so. If you have less time than this to wait, it’s probably in your best interest to cut your losses and look for a new opportunity. You need to have an end point and risk tolerance and know your limits when investing. And stick to it. If your risk tolerance is ten percent, take your money out when that investment dips ten percent.

Buying stock and how much is the easy part; it’s important to know when you want to sell it. When it goes up? Down? You need to make a choice and stick to a range you’re comfortable with. What happens tomorrow if the world totally changes? If your investment goes down, you need to know where you want to sell it.

Mistake #2: You don’t know what you’re investing in.

It’s important to know what you bought and why. “My advisor told me to buy it” isn’t good enough. There is so much research out there! But what good is it if you don’t use it?

Mistake #3: “Real estate is always a sure investment.”

It’s not a rule of thumb that trends that existed in the past will continue to exist. A great example is the housing market. People used to say that your investment will always go up in a housing market – look at our current situation!

Mistake #4: You buy an investment based on hype.

A mistake people make all the time is buying an investment on hype. They hear about it on TV or in the paper and they just want it for their portfolio. Instead of making a decision based on research, the company’s earnings, and prospects, they buy it based on what they heard from a different source.

Mistake #5: You invest before you reduce or eliminate other debts.

Investing before your debts are reduced or eliminated is one of the worst mistakes you can make. It doesn’t make sense to make an investment that you’re making four to six percent on and then have credit card debts with interest rates of 19 to 21 percent. It doesn’t even out or benefit you in any way. Investing is a gamble; it’s not a sure thing. If it doesn’t go your way and you have debt on top of it, now you’re double in the hole. It’s important that you take care of your debts first.

For a no-cost consultation with the Investment & Retirement Center located as First Financial, you can call 866.750.0100 or visit our website at www.firstffcu.com!

Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (866) 512-6109.  Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution.  CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. FR111123-03CE

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