Stocks: Five Market Mistakes to Avoid
Business Week, November 8th, 2009
Markets may have rebounded in 2009, but individual investors are still edgy and shell-shocked.
Even
as the broad Standard & Poor's 500-stock index remained up 56%
since March, the U.S. unemployment rate crept above 10%, according to a
Labor Dept. report released Nov. 6. "I don't think many people are
feeling very relieved," says Milo Benningfield of Benningfield
Financial Advisors in San Francisco. Many people believe the "[stock
market rally] can't last," he says.
These remain risky times,
and the last few years have demonstrated to investors the high cost of
doing the wrong thing. Against that nervous backdrop, BusinessWeek asked financial advisers what common mistakes investors are making, and how to avoid them:
1. Don't Jump In All at Once
A
little optimism can be a dangerous thing. Individual investors are
notorious for selling stocks when markets have already dropped and
buying after they have risen. And, says Susan Elser of Elser Financial
Planning in Indianapolis, "Selling low and buying high is the worst
thing you can do for your returns."
Among those who stayed away
from stocks and other risky investments for the past year, many are
irked to have missed out on the recent rally. But is now the right time
to buy again?
Don't rush back into the market because you worry
you've missed the rally. "The biggest mistake is [to try] to make
everything up at once," says Micah Porter, president of the Minerva
Planning Group in Atlanta.
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