Want a Strong Portfolio? Don’t Make These 7 Mistakes

Want a Strong Portfolio? Don’t Make These 7 Mistakes
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Good investment advice never goes out of style. And since it’s been a few years since I offered seven items for your “don’t-do” financial list, I wanted to bring these tips back with updated examples.


As I said back then, I’ve talked to many investors of all wealth levels who’ve made one (or more than one) of the mistakes listed below. Hopefully, their experiences will prevent you from doing the same.


1. Don’t Buy Into What’s Hot: No matter what the bubble is, it’s going to bust. From dot-com to mortgage credit to Bitcoin, following the headlines rarely makes sense for the long-term investor. If anything, it makes novice investors more vulnerable to shady dealers looking to separate them from their hard-earned money.


2. Don’t Work With a One-Trick Pony: If your financial adviser specializes in one type of investment vehicle, don’t be surprised if your investment needs amazingly align with that product. Truth is, your investment needs are complex; if your adviser is providing only one answer to your money management questions, it’s probably the wrong answer. Either find multiple firms to cover their specialties while you direct traffic, or seek out a comprehensive adviser with the knowledge your finances demand.


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3. Don’t Be Too Conservative. A conservative approach can end up being a very risky investment strategy, especially if you’re far from retirement. You need to build wealth to retire comfortably, and an overly conservative approach may not allow that to happen. That said ...


4. Don’t Be Too Aggressive. If you’re nearing retirement, growth takes a much lower priority – you need to protect the value you’ve earned. It’s all about making sure your needs (short-, medium- and long-term) match your strategy.


5. Don’t Get Emotionally Attached. No matter the market swings, your investment decisions should be backed by rational, cold-blooded calculations. Panic selling (or buying) may provide momentary relief from financial fear, but you’ll pay for it later. Can’t separate your feelings from your finances? That’s one of many reasons to consider employing an adviser.


[RELATED: Latest Financial News From MOAA]


6. Don’t Invest in Individual Stocks. The more advanced, more secure investor might be able to skip this section, but most people shouldn’t. This type of investment requires more research and know-how than the average investor possesses, and basing your financial future on tips from friends or the latest news rarely ends well. At best, it’s a gamble. At worst, it’s a disaster. Consider stock mutual funds instead.


7. Don’t Invest in a Bond Mutual Fund Expecting Individual Bond Performance. Bonds offer a set price, a set interest rate, and a set return at maturity. Bond mutual funds don’t. That’s not to say they can’t be part of a successful, balanced portfolio, but many investors confuse the two – and confusion can cause problems in your financial planning.


Need more? Check out MOAA’s Finance Page for member-exclusive offerings and the latest financial news.


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About the Author

Lt. Col. Shane Ostrom, USAF (Ret), CFP®
Lt. Col. Shane Ostrom, USAF (Ret), CFP®

Ostrom is MOAA's former Program Director, Financial & Benefits Education/Counseling