Money & Investing - Banks.com

There are a lot of lists going around this month, it seems, in the blogosphere. So I thought I’d put one together as well. The Online Investing AI Blog has a list of 16 investing mistakes. These are things you want to avoid, but I decided that there are 5 investing mistakes that the long term investor should really try to avoid:

1. Trading too often. This is kind of an obvious one for the long-term investor. After all, the point of long term investing is to avoid trading too much. But it can still happen to even the best of us. If we get panicky, or if we think something better is coming, we might start trading too much. Then the fees and commissions start to add up. And losses can too.
2. Not sticking with your investing plan. One of the hardest things for the long term investor to do is to stick with the investing plan. He or she becomes worried that maybe this isn’t the right thing. Or short term setbacks cause doubt. If you have a good investing plan, stick with it. Over the long haul it is likely to pay off.
3. Choosing actively managed funds. Actively managed funds seem like a good idea at first, but they really aren’t. In fact, they are usually a bad idea. You have to pay fees when the manager decides to change the composition of the fund, and you have higher annual fees. You could even have load fees. Actively managed funds are usually a Bad Idea when it comes to long term investing. Instead, consider low cost index funds or ETFs.
4. Not understanding how investing works. Get educated about investing and money work. You don’t have to know the minutae of what is going on, but you should have a general idea of how investing works. And you should understand your investments. If you don’t understand how it works (*ahem* derivatives, credit default swaps), it’s probably a Bad Idea.
5. Refusing to take responsibility. Ultimately, as The Online Investing AI Blog points out, you are responsible for your future and your decisions. Take responsibility for your investing plan and your choices. This might mean getting good advice to help you make decisions, but you have to realize that they are still your decisions.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.