Since all investors are human, all investors at one time or another are going to make a mistake. Using a strategy in conjunction with exchange traded funds (ETFs) can help right some of your wrongs, but it’s also wise to work to stop those mistakes from happening in the first place.
When it comes to investing in ETFs, some of the products available can make it easier to dodge disaster, while other products make it easier to make a mistake. Jeff Reeves for Investorplace on MSN MoneyCentral reports that there are seven investing sins to avoid, especially when dealing with your hard-earned retirement money:
- Wrath: Don’t let anger delude you or your money’s well-being. Many accounts plunged over the course of the fallout and bailout, so just look forward and forget about what can not be recovered. [Lessons Learned in the Market Sell-Off.]
- Greed: In this era of day trading and fast-paced Wall Street transactions, it’s easy to make the mistake of thinking your 401k is a brokerage account. Look at the trends and act accordingly, but it’s not the place for excessive buying and selling.
- Sloth: Don’t forget about your investments, though! A long-term strategy doe not mean you can ignore your nest egg and expect it to be larger when you need it.
- Pride: Pride has serious consequences for your 401k if you’re not careful. When a fund turns south or economic conditions change, you have to have the discipline to let go.
- Lust: Remember that past fund performance is not a guarantee for future success. Be mindful of expense ratios and fees when buying ETFs, as they can add up and cut into principal.
- Envy: Don’t jump into a trendy investment because your neighbor or friend has. Do the research first and make sure it’s right for you. [How to Put Available Cash Back to Work.]
- Gluttony: Though diversification is important, you don’t have to own every fund your 401k administrator offers to spread out your risk. ETFs are a basket of shares, and the diversification is already present when you invest in one, so don’t go overboard. [7 Winning ETF Characteristics.]
For more stories about ETFs, visit our ETF 101 category.
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.