Some Investment Mistakes You’d better to Avoid

admin — Fri, 17 Sep 2010 00:44:37 +0000

When you are investing money in the stock market or other financial ventures, there is always the risk that you will lose money. Sometimes this is because a stock or investment falters or fails to live up to its potential. Other times, this is because you may simply have chosen to invest in the wrong thing at the wrong time. It’s possible to avoid investment mistakes, but it’s also important to learn from them.

Let us know in the comments section below what you would add to the list.

1.) Overlooking the importance of asset allocation:getting asset allocation right is the building block of investing successfully.

2.) Confusing diversification with asset allocation: Asset allocation goes beyond simple diversification.

3.) Neglecting to rebalance regularly: After you set up your initial asset allocation, you need to make sure to keep those allocations on target over time because some asset classes will grow faster than others.

4.) Favoring short-term needs over long-term goals: Rather than focus on short-term goals, invest based on thinking about your long-term goals, income expectations and risk tolerance.

5.) Letting your emotions control you: In these volatile times, it is important to stick with your long-term plan so you do not fall victim to greed and anxiety.

6.) Getting addicted to the financial media: Paying attention to financial news 24-7, according to Mr. Miccolis, will just increase your anxiety, since what the market does in a single day does not matter in the long run.

7.) Chasing performance: Buying the latest hot stock or sector is like “driving a car by looking in the rear view mirror,” Mr. Miccolis said in a statement. Generally, by the time you know it is hot, it is old news and there is not much profit left in it.

8.) Trying to outsmart the market: Studies have shown that active management underperforms passive management in the long term.

9.) Disregarding tax implications while investing: “Common mistakes,” according to Mr. Miccolis, “include putting annuities in an I.R.A., putting tax-inefficient investments like REITs in a taxable account, failing to harvest tax losses and not taking advantage of lower tax rates for long-term capital gains.”

10.) Allowing caution to supersede the reality of inflation: Safe, low-return investments like money funds, C.D.’s and Treasury securities will not keep up with inflation over the long haul. “For most people, inflation is their biggest financial threat over their lifetimes, not what the markets happen to be doing this year,” Mr. Miccolis said.

In summary, it is a lot easier to enjoy the investment process when you learn how to avoid committing some of the most common and expensive investment mistakes. Making money is more enjoyable than losing it. Steering clear of just one of these deadly dozen investment mistakes can literally make the difference between wealth and poverty.

Direct experience has taught me each one of these investment mistakes the hard way, and I share them with you here in the hope you can take a less expensive route to the same knowledge. If you have an investment mistake (or two) that I overlooked then please add it to the list in the comments section below. Your participation in the discussion is encouraged and appreciated.

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Investment Dictionary: Foreclosure

admin — Wed, 01 Jul 2009 08:49:18 +0000

Foreclosure is the legal and professional proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor’s equitable right of redemption. Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption. Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue HOA dues or assessments.

The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien”. If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgement.

How to Find Foreclosures:
Finding foreclosures is fairly easy in depressed markets, but it’s also simple to find foreclosures in strong real estate markets. The difference between the two markets is you will find a greater number of foreclosures in falling real estate markets.
Many pre-foreclosure homes that were once offered as short sales end up as foreclosures, which are eventually deeded to the bank. The reason why purchasers may refuse to buy a short sale home could be any of the following:

Sellers stripped foreclosure home’s assets and / or vandalized the property.

Bank refused to accept less than its present mortgage balance.

Buyers passed by the short sale in favor of a hassle-free purchase.

Location of the home and / or neighborhood was undesirable.

Listing was overpriced at mortgaged amount.

Seller did not qualify for a short sale.

Top 10 Foreclosure Cities:
1 Merced, California
2 Modesto, California
3 Stockton, California
4 Riverside, California
5 Detroit, Michigan
6 Fort Lauderdale, Florida
7 Cape Coral, Florida
8 Vallejo, California
9 Las Vegas, Nevada
10 Sacramento, California

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Some Investment Mistakes You’d better to Avoid

Investment Dictionary: Foreclosure