Avoid Making Big Financial Mistakes


3. Planning for retirement when you retire

Karen Altfest, executive vice president at Altfest Personal Wealth Management, cringes when she recalls a sit-down with a recent retiree. “The man said, ‘Could you help me know if my portfolio will last through my retirement?’ I asked him when he was planning to retire, and he responded: ‘I retired last month.’ “In Altfest’s mind, the question came years, if not decades, too late.

It’s a tough situation, she says, when people don’t start to plan for their golden years until the day of their office retirement party. “These people forfeit the time factor in planning for their goals, which means the adviser is limited by … client decisions that have been made to date (and may not be easily reversible) and assets there are at this time.”

That’s not to say a plan that includes such things as estate planning techniques and tax strategies can’t be assembled at the 11th hour, Altfest adds. She reviewed her client’s portfolio and assets, talked to him about his risk tolerance and financial goals, explored the costs of staying where he lived versus downsizing. “What I could not do was tell him how to save more and plan better for a retirement that was still years away,” she says.

The fix: A better approach is to hatch a plan in the years leading up to retirement, she stresses. “If he had made that call to me some years earlier, I might have presented him with a variety of ways he could have prepared for his and his family’s future,” Altfest says.

4. Chasing the latest investment fad

From Merriam-Webster: fad (noun): a practice or interest followed for a time with exaggerated zeal: CRAZE.

Whether it’s meme stocks such as GameStop, cryptocurrencies like Bitcoin, or blank check companies dubbed special purpose acquisition companies (SPACs), investing in fads can be dangerous to your financial health, says Jan Blakeley Holman, director of advisor education at Thornburg Investment Management.

Holman isn’t a big fan of Bitcoin, the wildly volatile digital currency that has made many people rich but that has also saddled many others with devastating losses due to huge downdrafts after hitting all-time highs.

“It’s difficult to avoid all the hubbub about Bitcoin,” Holman says. It’s in the news, in conversations at the golf course and dinner table, and even in Super Bowl ads, she notes. There’s just one problem: “The jury,” Holman says, “is still out on whether cryptocurrencies are lasting investments.” For now, she says, Bitcoin appears very speculative. And while everyone wants to get rich quickly, Holman offers a dose of humility: “History is littered with stories of fad investments that turn into bubbles. From tulip bulbs to the dot-com stock mania, eventually all bubbles burst and fall back to earth.”

The fix: Stick to established investments such as stocks, bonds and real estate, and diversify your investments to avoid having all your eggs in one basket. And if you do want exposure to Bitcoin, make sure it’s just a sliver of your overall portfolio and use money you can afford to lose.

5. Letting emotions dictate portfolio moves

The emotional impact of investing can be costly. That might mean getting caught up in the euphoria of a bull market, for example, and betting it all on stocks and buying when prices are high. Or, conversely, letting fear and panic spook you out of the market and selling low after the stock market has already fallen off a cliff. “The emotional roller-coaster is responsible for more wealth loss than probably any other single factor,” says Neel Shah, a certified financial planner and estate planning attorney with Shah Total Planning.

Ignoring time-tested financial principles, such as buying low, selling high and staying the course during market downturns, is a recipe for investment failure, adds Thorne Perkin, president of Papamarkou Wellner Asset Management. “Paradoxically, the stock market is the rare store where people race for the exit at the sight of discounted prices — when everything is on sale,” he says. “While staying the course can be difficult to do when financial markets get, history has shown that steadfast tested investors heap rewards. Investors are well advised to maintain some patience and employ a nonreactive, long-term investment horizon. Rome was not built in a day.”

The fix: Maintain a disciplined approach and regularly revisit your risk tolerance to ensure that you’re meeting your goals, Shah says. If you think you’re prone to panic buying or selling, seek out a financial professional to guide you.

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