Do-it-yourself investors make some common mistakes with their investments. These mistakes usually lead to below average returns in the market. In fact, a recent study by the firm Dalbar shows that from 1992 – 2011 the average investor returned 3.49% annually whereas the S&P 500 Index returned 7.81%. Having a good advisor at your side can help you to avoid making the same mistakes which will help you attain your financial goals. So what are these common mistakes?
- No Financial Goals or Changing Goals Too Often
- Investing Emotionally, Not Rationally
- Relying on so Called “Experts” in the Media
- Becoming Overwhelmed
- Not Understanding Compound Growth
Having a skilled advisor at your side will help you to create a long-term plan and stick with it. He or she is your sounding board for you to bounce ideas off of to see if they make sense for your goals and fit inside your plan.
Additionally, the advisor will be there for you to hold your hand when times become volatile. By understanding that short-term volatility will always be present and keeping your focus on the long-term, you advisor will help you to invest rationally and not emotionally.
With today’s 24/7/365 news channels, there are “experts” everywhere. Listening to their advice is flawed because everyone’s situation is unique. What is good advice for one person watching or reading might be terrible advice for another. Ignore these talking heads and develop a plan customized for you and your goals.
When it comes investing in the markets, time is your best friend. This is why you always hear that the best time to start investing is now. This is because the sooner you begin, the sooner you can let your money compound upon itself and grow even more.
Long-term investing carries with it some form of risk. But having a qualified advisor by your side that will educate you and take the time to create a customized plan for your needs will go a long way in reducing some of that risk and help you to avoid making the same mistakes as do-it-yourself investors.