6 Mistakes ETF Investors Should Avoid
January 25th 2011 at 1:00pm by Tom Lydon
Every exchange traded fund (ETF) investor has done it. Mistakes happen to the best of us. Even if you’ve been investing for years, you’ve probably made a mistake in the not-too-distant past.
Some of the worst investing mistakes are those that happen on an everyday basis. Here are seven of the most common, from Craig Ford on WiseBread:
- Starting Too Soon: Start investing when your finances are in order. For example, you might consider paying off credit card debt before you start investing. Investing isn’t just about jumping right in when the mood strikes.
- Overpaying: There are so many deals out there with ETFs: free trades, low-cost commissions and slashed expense ratios. Compare the costs of what you’re doing to ensure you’re getting the very best deal.
- Focusing On the Fees: Fees, of course, aren’t the be-all, end-all. You should also consider other factors when selecting a fund: performance, index tracking, turnover and diversification. The cheapest fund isn’t always the best fund.
- Risk Tolerance: Investors usually find out what their risk tolerance really is in a bear market. You don’t want to find yourself selling in a panic. Have a sell strategy already in place so that when it’s time to let go, you can do it.
- Changing Strategies Based On Markets: Yes, you may need to re-evaluate your strategy based on market conditions, but don’t let your investing approach change with every ebb and flow in the market. Pick a strategy, stick to it and use it. [The Basics of Trading With ETFs.]
- Looking For Tips: Hot tips? There’s no such thing. Anyone who professes to know what’s going to happen is simply wrong. Look for what’s actually happening in the market and make your decisions accordingly – don’t make moves based on hunches.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.