Financial planning can seem complicated. We understand that investing and making the right financial decisions isn’t always easy. But there are some areas you can start working on now as an investor.
1. Not Setting Financial Goals
Setting goals and achieving those goals is rewarding and self-fulfilling for anyone who has enough discipline to execute on their ambitions. In order to make plans for the future, it’s essential to have a clear understanding of where you are at this present time and where you wish to be in the future. Goals should be precise, measurable, attainable, relevant and timely. By sitting down and working through where you want to be in the future, you can gain a clear understanding of the steps you can take to get their today. (For more, see: 5 Financial Planning Decisions You Won't Regret.)
2. Using a Broker
A financial advisor that’s a broker facilitates the buying and selling of financial securities or products between a buyer and seller. In doing so, he or she receives commissions on those sales. A fee-only financial advisor has a fiduciary responsibility to act in your best interest. Because a fee-only financial advisor is paid by his or her clients rather than through commissions, they do well by doing well by their clients.
3. Listening to Market News
Turning off market news and tuning out market analysts will help your investment choices in the long run. Nobody can predict what the market will do. Our job as wealth managers is not to select and time the market but rather plan for our clients so their investments are diversified, so they can better withstand volatile markets. (For related reading, see: 5 Financial Strategies to Last a Lifetime.)
4. Obsessing Over the Market
Obsessing over the market won’t change the market, and letting it consume you may have a negative effect on your investments because of the extra fees and commissions you’re paying when you buy, sell and trade. When we let our emotions (fear) take over, we have little control over the outcome. That’s why a wealth manager helps their clients reach financial success by acting on a plan, not reacting to the market. Financial advisors help to guide you to calm waters when you’re feeling anxious about your investment choices. After all, we could all use a little grounding from time to time. (For more, see: Logic: The Antidote to Emotional Investing)
5. Putting All Your Eggs in One Basket
If you’ve heard it once, you’ve heard it a million times: diversification. The idea of diversifying your portfolio is that the positive performance of some investments will offset the negative performance of your other investments. The logic is simple but the process and planning is timely and can be complicated. When looking for experts in the field, do your homework and try to work with a fee-only financial advisor. (To read more, see: Should You Choose a Fee-Only Financial Advisor?)
Quality, financial literacy and tips like these can help you avoid common mistakes and become a consciously-aware investor.