July 2, 2012

Top 10 Investor Errors: You Are Your Own Worst Enemy

Third of ten short articles by Barry Ritholtz.

This one bites a lot of investors. Whether through panic selling when the market is tanking or impulse buying after a hot stock has peaked, trading on emotion is a quick way to loss.

The buy-and-hold strategy with deposits allocated among many investment types (called diversification), coupled with payroll withholding or automatic deposits leads to long-term, hands-off gains.

Check back on how your retirement investments have performed and re-balance once a year, or look into targeted retirement mutual funds that handle allocating and rebalancing holdings for you. The latter is a smart option for reluctant investors who don't enjoy the challenge of managing their accounts. Avoid tweaking your holdings throughout the year.

Unless you're a well-disciplined financial news junkie, avoid CNBC like the plague. You are not Jim Cramer. Rapid moves in and out of stock positions will only make your broker wealthy, not you.

Remember, retirement investing is not about getting rich, it's about preserving the income level from your final year of work through the succeeding years of part-time work, volunteerism or whatever you choose to do with the rest of your life.