If you want an entertaining look at the traditional seven deadly sins, watch the aptly named Se7en.
Bradd Pitt, Morgan Freeman, Kevin Spacey, and an array of gruesome deaths.
Investing’s seven deadly sins, on the other hand, are not in the least bit entertaining. In fact, tick a few of those boxes and you may seriously jeopardise your retirement planning.
The greatest sin of all is not bothering to worry about your financial future, and time and time again the benefit of starting early – no matter how small the amount saved – have been proven.
But rather than listening to us preach, let’s lean on the wisdom of the money minds over at Forbes for a look at which missteps to avoid:
Holding Too Much Cash
We all need to have a certain amount of cash. At a minimum, you need to have cash sitting in an emergency fund for unexpected expenses or short-term income disruptions. You also need to have some cash to take advantage of any investment opportunities that may arise.
Paying Excessive Fees
The problem with fees is they reduce your return on investment. If you’re paying 2% per year in investment fees, a 10% return on your portfolio will be reduced down to 8%.
Tacky Tax Planning
This is about minimizing the tax burden from your investing activities. The best way to do this is by holding as much money as possible in tax-sheltered retirement plans
Being Clueless About Diversification
Many investors suffer from two common allocation sins: either being too conservative and/or poorly diversified. Being poorly diversified means putting most or all your money into a single investment or even investment class.
You shouldn’t do that even with broad investment categories, like stocks. Even though they may represent the majority of your portfolio, you still need to hold at least some money in bonds and cash.
At its point, you might be a little intimidated but you don’t have to go it alone.
Consider that companies like Consequence Private Wealth are well-versed in the art of diversifying investors’ capital across a range of investment instruments.
Unit trust funds, hedge funds and share portfolios, local and offshore investing, retirement funding vehicles, and more – boom, you’re diversified.
Day Trader Syndrome
This is one of the biggest investment delusions around, and it’s surprisingly popular. After all, who wouldn’t be drawn by the idea of opening a brokerage account, sitting at your computer, and making hundreds or thousands of dollars each day by moving in and out of stocks?
The reality is day trading is the investment equivalent of buying lottery tickets. At least 90% to 95% of people who do it lose money.
You may think everybody is hitting it out of the park, but it’s similar to how people posts happy, glamorous photos on Instagram when things are falling apart behind the camera.
Letting Headlines Derail You
Media sensationalism can cause you to panic and overreact, even to “news” that doesn’t apply to you. Don’t let news stories get you to change your investment strategy. You need to think long term, and ignore the short-term disturbances.
Debt Denial
There’s no way to invest for your future if you’re drowning in debt. The problem for many people is they don’t know how bad their debt situation is. They may not even know how much they owe…
If you have a serious debt problem, face it and fix it before you begin investing.
There’s also a wonderful peace of mind that comes with being debt-free. Excuse me, just off to check my credit card balance.
Start planning now, protect and build your wealth, and save your sins for the really fun stuff.
[source:forbes]
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