Most Common Mistakes Made by Investors INTRO: Each of us strives to achieve some type of long-term financial security. As we save for our retirement and other future financial needs we might wonder are we making mistakes in our approach to investing. Here with us today is Bruce Hagan, Certified Financial Planner, to tell us some of the most common investor mistakes. Q1. Bruce, before outline the mistakes can you give us some general advice on what we should be doing as long-term investors. A1. In general we want to put ourselves in a position to benefit from two powerful forces we have on our side: 1. Time, which lets us build wealth slowly and steadily and 2. The power of compound interest, which gives your portfolio an enormous boost - especially in the latter stages of an investment program. Q2. O.K., So what are many of us as investors doing wrong that offsets this. A2. Well, there are many things and most center around the first mistake I’ss mention which is not treating investing as a business. You need to think of yourself as CEO of your own investment "company" and make sure your assets are managed in a systematic, disciplined way. Often people are so busy trying to make money that they don’t devote time to the investing of it. Q3. Should people have a "business plan" for their investment company? A3. Yes, and it should be an asset allocation model or pie chart, which we’ve talked about so frequently. It doesn’t have to be elaborate but you should know approximately what mix of investments is appropriate to help you achieve your goals over time. Q4. What other mistakes do we tend to make? A4. Taking a short-term outlook and trying to "time the market". Some people feel they must select the optimum time to invest and that they must either be "in" or "out" of the stock market. Smart investors stay focused on their long-term goals and may shift investments in response to market changes but make wholesale changes very rarely and usually in response to changes in their own lives which alter their goals. Q5. What about investing emotionally? A5. Absolutely one of the biggest mistakes and hard to avoid. Our investment decisions can be influenced by ego, impatience, fear, denial, procrastination, and anger. Try to make sound business decisions and a plan helps you to do this. Q6. Other pitfalls to avoid? A6. Investing solely on the basis of past performance. While we need to know what kind of returns a mutual fund, for instance, has produced in the past, this is not the only piece of information to base a purchase decision on. You cannot buy past performance, you can only buy future performance and look closely at other factors including how much risk is the fund manager taking in creating these returns and is that level of risk appropriate for you. Optional Q. What about being too conservative or too aggressive? A. Good point! Investor’s returns form assets can come from only two components - an income component and/or a price component. It doesn’t make sense to have 100% of your return based on just one component. The discussion offered above and in the movie should not be considered an endorsement by Florida State University. They are offered in the educational sense of providing thought-provoking information for our Web audience. Copyright shared with Florida News Channel (FNC), all rights reserved. Broadcast 2/11/00