6 Rookie Portfolio Mistakes Even Seasoned Investors Make
Even if you’ve held a brokerage account for decades or have made it a point to stay up-to-date on your daily stock market news, one thing is clear: There’s only one Warren Buffett—and you’re not him.
And that’s O.K. Very few people come close to reaching the level of investing wisdom held by the Oracle of Omaha. After all, even the professionals don’t understand investing all the time, so why should you?
In fact, there are lessons we could all stand to learn about managing a portfolio—regardless of whether you’re an old pro at it or a total newbie. Take these six common blunders that even experienced investors tend to make.
Rookie Mistake #1: Investing Without Purpose
Passionate investors are often glued to the financial news so they can glean more insight on what exactly to invest in. Maybe Company X has a game-changing product in development or Industry Y is showing strong market growth—and they want to get involved ASAP.
But it’s important to take a step back before taking the plunge. “A lot of people do good research on their own and identify solid funds,” says Chad Carlson, a CFP® with Balasa Dinverno Foltz. “But what’s the goal of their portfolio and how do those funds fit in? Does this make sense?”
In other words, consider asking yourself: Am I seeking growth? Do I want stability? Do I want dividends? What, eventually, do I want to tap this money for—retirement or some other savings goal?
Answering these questions will help you decide whether that “great” investment makes sense to add to your total mix. Remember: Your whole portfolio should reflect your risk tolerance, goals and timeline. So if any changes you make skew your portfolio too heavily in one direction, be prepared to reconsider whether to make the investment or be willing to rebalance accordingly.