The volatility experienced by investors over the past couple of
years has underscored at least one thing: the importance of financial planning. With the coming start of the new year, now is the
ideal time to map out both short- and long-term goals for your
financial future. Mike Periu, a financial educator and principal at
EcoFin Media, a company that produces financial literacy content,
shares how to sidestep six common investment mistakes heading
into 2012.
1. DON’T IGNORE THE BIG PICTURE.
“People tend to look at specific investments in isolation,” Periu says,
comparing this approach to selecting tools before knowing what you plan
to build. In fact, investors should start by understanding their current
situation and financial goals. “From there, they can determine which
investments are best,” he says.
2. DON’ T PU T TOO MUCH EMPHASIS ON DIVERSIFICATION.
Everybody knows the risks associated with putting all your eggs in one
basket. Although the adage remains true, Periu cautions, “If you have perfect diversification, you won’t make any return.” Instead, he advises clients
to minimize the risk of specific investments, such as a particular stock.
3. BE WARY OF THE COMMODITIES MARKET.
Historically, commodities have been high performers, but they’ve
already seen a tremendous run-up in cost, Periu says. “We see lots of large
institutional investors, like hedge funds, moving capital in and out of the
commodities market. That translates into volatility and significant risk for
individual investors,” he notes.
4. BE REALISTIC ABOUT THE DOWN REAL ESTATE MARKET.
Periu advocates investing in bank-owned residential properties—
for those who possess “sufficient capital to offer a decent down payment.”
In some markets, property is inexpensive enough that investors can
charge enough rent to cover the mortgage, taxes and maintenance, he
says. “But remember that it could take 10 years for property to appreciate,
so you need patience.”
5. DON’T BE PARALYZED BY FEAR.
It is a mistake to make future investments on the basis of past investments, Periu reminds. “Gun-shy investors are contributing to the Wall
Street sell-off. However, just because you had a bad time with stocks
recently doesn’t mean they are forever a bad investment.” If you lack the
time or knowledge to research stocks, Periu suggests choosing a mutual
fund or relying on an investment professional.
6. IT’S NO T ALL ABOU T RETIREMEN T.
When deciding where to put your money, strike a balance bet ween
general investments and retirement funds, Periu says. Families paying a
mortgage or subsidizing a child’s college education simply can’t save as
much for retirement. “My recommendation is to maximize tax-advantaged
retirement accounts and employee matches,” Periu says. “Then use the
remaining cash flow to support your lifestyle.” —Gwen Shaffer
Elemen; Ho;el;
Space to live your life
Stay four nights
& get 25% off
Book now
elementhotels.com/amtrak or
call 1 877 element and mention
rate code AMTRAK25
Discover Element Hotels
Lexington, MA New York, NY
Denver, CO Hanover, MD
Omaha, NE Ewing, NJ
Las Vegas Summerlin, NV
Dallas Fort Worth Airport, TX
Houston, TX
SCAN TO BOOK
Get the free mobile
app at gettag.mobi
©2011 Star wood Hotels & Resorts Worldwide, Inc.
All Rights Reserved. For full terms and conditions,
visit elementhotels.com/amtrak
