“Investing on emotion destroys returns,” Schatz warned. “People buy high and sell low.”
Along with having a plan, investors will have to maintain the discipline to stick to it.
Due diligence. Researching an investment involves more than just looking at how a security is performing or pinpointing the top and bottom. Investors should consider a fund’s holdings, investment strategy, fees and fundamental market conditions. [High Active Fund Fees Make Passive ETFs Look Attractive]
“As the saying goes, past performance offers no guarantees of future performance,” Allan Katz, president of Comprehensive Wealth Management Group, said in the article.
Stick to the plan. Investors should plan their portfolios with their own time-horizon and risk exposure in mind. The investment portfolio strategy should include an outline of how investments will be diversified and the percentage of portfolio exposure to each asset class. Additionally, an investor should think about rebalancing his or her portfolio at least annually to keep portfolio allocations in check.
Need help? Sometimes asking for help from financial advisors can focus an investor’s expectations. Schatz points out that most advisors have crafted their own strategies and know how to establish a thought out portfolio. While investors can opt to go the full advisory asset manage route, you can also pay a professional by the hour or contract an advisor for a project.
For more information on investing with ETFs, visit our ETF 101 category.
Max Chen contributed to this article.