In the following audios, Mark Matson discusses the traps that investors can fall into. When you’re done with these audios, go to this page: 3 Power Strategies to overcome these investor traps and create a powerful portfolio for yourself. These audios can increase your awareness and confidence in investing.
Each audio is short enough for a thought of the day. You don’t have to listen to them all at once to improve your investing strategy. Come back anytime to listen again!
Trap 1 — Gambling
Don’t gamble with your money, unless it’s a small amount of money you can afford to lose. Don’t speculate with money you need for your retirement and your future. The media and financial community often confuse prudent investing with what is actually gambling! First warning sign: Trying to “pick the best stock.”
Trap 2 — Timing
Trying to predict and forecast when to get in and out of the market doesn’t work. “Track record” investing doesn’t work either, because forecasting future performance based on past performance is a mistake. Remember: Having a lot of stuff in your portfolio is not true diversification, you must have different asset classes!
Trap 3 — Mistaking Activity for Control
We’re led to believe that if we constantly buy and sell, that we are in control. It’s simply not true. In fact, the more activity in our portfolio means more commissions, fees and spread paid, and less money made.
Trap 4 — Believing All Risks are Equal
All risks are not equal — not all risks are directly related to potential rewards. You need to assess levels of risk — and find and take prudent risks versus imprudent risks. Prudent risk has a high statistical probability or likelihood of giving you returns over time.
Trap 5 — Trusting Your Broker
So many people are led to believe that the broker “works for you,” when in fact, the broker works for the broker/dealer. The broker’s job is to sell, not give unbiased advice.
Trap 6 — Believing This Time It’s Different
If we study recent history, we were all led to believe that we were in a new paradigm with a future shaped completely by the internet and technology, and it sounded great at the time. At one time we were also led to believe that we needed to invest in “blue chip” companies to get rich. None of it was based in reality.
Trap 7 — I’ll Stop When I Get Even
Do you know the actual amount of risk in your portfolio — has your financial planner ever given you a measurable, quantifiable number? Many people will wait until their portfolio is “back up” or “even” before they take action to invest more prudently — this is a mistake. Start now.
The concepts presented here are based on copyrighted materials originally developed by Matson Money, Inc. Mathies Financial Partners and Matson Money, Inc. are not affiliated.
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