Three Big Mistakes Investors are Making Right Now
In one of most prolific bull markets in recent memory, we frequently consult new clients that have a hunger for success, and frankly, overly optimistic ideas about where resources should be allocated. Many investors believe that a strong economy means it’s time to smash the gas pedal and chase big payouts on short timescales.
However, bull markets are, in fact, the best time to lay the groundwork for a sensible, conservative investing plan that leverages assets optimally instead of in the pursuit of a quick buck. Here are 3 of the most common mistakes we see when we talk to new clients:
1. Chasing Returns Instead of Long-Term Value
In a bull market, many investors are tempted to gamble big on stock that are expected to soar in value on a short timescale, facilitating rapid financial returns. Although the concept of “striking oil” is seductive, a more sensible way to invest revolves around diversifying assets intelligently to realize the most consistent and predictable long-term value.
The incredible rise in popularity of vehicles like index funds, ETFs, and other highly financialized asset classes is owed, in part, to the relatively “safe” mechanism that risk-diversified classes provide. If you have capital to play with, it’s wise to develop and implement a plan that mitigates risk intelligently and targets long-term portfolio value over a quick payday.
2. ‘Keeping Up With the Joneses’
We often consult individuals that get into investing for precisely the wrong reasons – keeping up with the Joneses, to use a popular phrase.
Lifestyle envy – whether it’s in the pursuit of a new car, boat, summer home, or another shiny object – can lead otherwise sensible, strategic thinkers to pursue instant gratification, which almost always translates into poor investing decisions (see point #1). A strong financial strategy is rooted in a desire for realistic, long-term success – not a desire for a brand-new Porsche.
3. Taking On Too Much Risk
Risk is an inevitable part of life, but in the world of investing, it has a very specific place and time. Many investors erroneously believe that a bull market is more likely to reward high-stakes gambles, and accordingly, that an “all in” mentality is the key to winning the proverbial “game” that is the market.
This couldn’t be further from the truth. Bull markets, while defined as periods of average new growth, are equally, if not more volatile than bear markets, meaning an “all in” approach, even during the good times, can quickly and irreversibly spell disaster for the over-eager investor.
Ultimately, the best way to take advantage of a bull market is to stick to your conservative investing plan while making cautious micro-adjustments to capitalize on promising asset classes that thrive in growth conditions.
Partner with a wealth management expert that knows how to avoid hype and execute to a sound strategy. Reach out to Cypress Private Wealth to find a strategic partner that has the experience, knowledge and patience to help you reach your financial goals.
The opinions voiced in this material are for general information only are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
There is no guarantee that an investment strategy will yield positive outcomes. Investing involves risk, including loss principal. The advisors of Cypress Private Wealth are Registered Representatives with, and securities offered through LPL Financial, Member FINRA & SIPC. Investment advice is offered through Strategic Wealth Advisors Group, LLC, a registered investment advisor. Strategic Wealth Advisors Group, LLC and Cypress Private Wealth are separate entities from LPL Financial.