Carnegie Investment Counsel Blog

6 Mistakes to Avoid in Your Investment Portfolio (Including One that Almost Everyone Makes)

Posted by Gary Wagner on May 22, 2019 9:57:00 AM

Carnegie Blog 6 Mistakes to Avoid in Your Investment Portfolio

Successful investing takes patience. There is no Holy Grail or magic, risk-free formula that ensures success and worry-free sleep. In short, investing involves some risk-taking. However, here are six mistakes you can avoid in your investment portfolio. 

Watch the Video: 6 Mistakes to Avoid in Your Investment Portfolio (Including One that Almost Everyone Makes)

#1: Owning too much of the company for whom you work.

While many companies are generous with stock plans, it may not be smart to put too many eggs into one basket. Be sure to balance your portfolio and diversify out of owning too much of the company whose name is also on your paycheck.

Mistake #2: Failing to rebalance your portfolio regularly.

Financial planning is not a one-time "set it and forget it" exercise. It should be a dynamic process that requires review as your life changes. Plus, it is important to rebalance your portfolio as positions change.  

Mistake #3: Making knee-jerk reactions.

While ”setting it and forgetting it” is not a good idea; selling on market fluctuations or emotions is also a mistake. It is essential to remember your long-term goals and objectives. In a market movement event, panicked clients often call to ask if they should "sell out." That's normal to wonder, but as we've learned over and over, it seldom pays to act on emotion. 

Mistake #4: Speculating in the market.

Your investment portfolio is not the place to be a hipster. Purchasing new, flashy stocks in companies in hopes of a quick lift can be a mistake. Instead, open your cupboard and look inside. Think about those staples. Focus on solid businesses that have been performing well for years.   

Mistake #5: Losing patience.

In your investment portfolio, as in life, slow and steady wins the game. A disciplined approach and following a plan is the best way to achieve your goals. Talk with your advisor. Have realistic expectations about the growth that each stock will obtain.

Mistake #6: Waiting to get even.

This is the mistake we see over and over. Waiting for a losing stock to get back to its original cost basis is called a "cognitive error" in behavioral finance terms. By failing to realize a loss, you are losing in two ways. Not only could the stock continue to decrease in value until it's worthless, but you are also losing out on the opportunity of using those dollars better elsewhere.

A firm like Carnegie Investment Counsel can help take the emotion out of investing by providing objective, calm advice. We can help you keep your head while others are losing theirs.  

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." - Warren Buffett

Topics: Investment Management

Gary Wagner

Written by Gary Wagner

Gary Wagner is Principal and Chief Operations Officer. He also works directly with clients to provide investment and strategic wealth advice. Gary sits on Carnegie’s Investment Committee and also manages the firm’s strategic initiatives and operations.

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