Financial Mistakes to Avoid
We all want money to be one less thing to worry about. Some of us even have our eyes on the prize of financial wellness – a way to build wealth. Having said that, there are some common mistakes that should be avoided.
Don’t put all your eggs in one basket
Diversify. The average investor may have stocks and bonds in their 401(k) savings or investment portfolio, but the truly successful branch out and diversify.
In addition to stocks and bonds, the ultra-wealthy invest in things such as real estate, limited partnerships, and private markets. Real estate has been a reliable wealth-building vehicle since sliced bread came along.
In addition to the potential appreciation of a property, if you rent it out, you get an immediate source of income which can give you a nice cushion should you need it.
Don’t do it alone
The truth of the matter is that managing one’s money affairs is a time-consuming activity. If you don’t have time to spend a few hours a day tracking the market, the cost of a good financial advisor is well worth the investment. Ask any of the wealthy class, and they’ll tell you that they don’t go it alone – they hire investment counselors, financial planners, CPAs, and attorneys to protect their assets and possibly reduce their risks.
While some may hesitate at paying a fee, the returns on that money will, for the most part, be well above that amount. During downturns in the market, your advisor can help you mitigate your losses to preserve your wealth for the long haul.
Research shows that only one in four Americans have a written financial plan, but those who do exhibit positive investing and saving behavior.
Don’t do the Macarena with your money
Remember that popular dance in the 1990s? It was a fad that came and went like many investing fads do. But the thing about investing fads — they come with a lot more risk than looking silly on a dance floor.
Take Bitcoin, for example. The cryptocurrency took off in 2017, making instant millionaires out of some early investors. That spurred a lot of people to jump in and try their hand at making a fortune.
But for those who were paying attention, that wasn’t the first time this idea had come along. There have been many attempts at creating a digital currency during the 90s tech boom, with systems emerging on the market but inevitably failing. There were many different reasons for their failures, such as fraud, financial problems, and even corporate in-fighting.
Economist Jim Rickards had his say on cryptocurrency, “I’m very skeptical of Bitcoin. It’s going up about 10% a day at this point. Although Bitcoin could go to 20,000 or 30,000 – it’s on its way to zero. It’s a utility token for criminals, terrorists, money launderers, tax evaders – they’ll always find some use for it, so it may not go all the way to zero. It’s clearly a bubble.”
Listen to the Hitchhiker’s Guide
In the fictional Hitchhiker’s Guide to the Galaxy, there are two bold words printed on the cover — DON’T PANIC!
The volatile stock market may make you want to run for cover. Because the wealthy are in it for the long term and because they have knowledgeable and trustworthy financial advisors, they don’t tend to panic.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC