5 DIY Pitfalls
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It’s a fact that any person you talk to at anytime in the day will have entirely way too much to do. When you are not putting fires out at work or thinking about what you have to get ready the night before so you can hit the gym the next morning it’s fair to say everything else that needs to be done is put on auto pilot. Hopefully what you aren’t putting on auto pilot is what your investments are doing if you are a Do-It-Yourselfer. If you are one of the few who is in complete control and master of their universe I have two things for you, first congrats that’s kind of a big deal when you can say that and second I hope you too enjoy what’s coming up. Here are 5 things DIY’er investors might lose sight of from time to time and can cost them because of it.
- Transaction Costs. There are a few things to think about when you are trading and the fees that go with it. Are there costs associated with buying, selling, short-term, derivatives, or mutual funds? What kinds of trading programs are you involved with, is it only stocks and everything else costs more? Trading for gains is great but if you lose sight of the costs it can cut into your profits or even end up costing you money. On top of all that tracking is this an account that you are paying monthly or annual fees on just to keep open?
- Hobby or Day Trader. Actively managing means you have to be actively involved in markets, news, and financials; imagine that. You need to personally evaluate your time to find out if that kind of devotion is a worthy use of your time. Now for some traders that is how they make their living from day trading and that’s awesome but if trading is more of a hobby think about managed funds like ETF’s and stocks/bonds that you like.
- Emotion. It’s another one of those publicly accepted facts that everyone loses their heads from time to time and does something irrational that they have to explain later. Hopefully when that happens you won’t be in front of your computer with your trading windows open. It’s natural to get scared, excited, or scared because you’re excited at what happens in financial markets from day to day. The key is to stick to the plan you started with, yes you should have a plan before just putting money into the markets, so when this does happen you can regroup, rebalance and refocus on what’s important.
- Experts and pundits. Don’t get so caught up in what experts say that you actually don’t end up doing anything. That’s what I like to call information paralysis. If you wait until your favorite expert gives you the green light on something then you are already too late. You should be making moves on what you want/enjoy. Because you enjoy it you’re more committed to keeping track of it and that gives you better opportunities to catch gains as they arise.
- What you’re investing. If you have active trading accounts, as a rule of thumb, they shouldn’t be your only egg in the basket. What I mean by that is you should not be actively trading in your retirement accounts that are earmarked for 40-50 years out. If you have money set aside for mortgage payments or your child’s education that’s money that should also not be grouped in with your active trading accounts. Break out 5-15% of your investible assets, not dipped into savings to invest assets, and start with that. This can give your portfolio an added aggressive edge without disrupting all the rest of your financial plans for the future.
Hopefully this article brings to light some of the things you may have put on the back burner and helps bring that efficient trader in you back to the forefront. If you’re still looking for more tips to be an efficient trader feel free to shoot me an email from my contact page or check this little number out The Neatest Little Guide to Stock Market Investing. It’s a little paper back that I really enjoyed. It is seven chapters loaded with tons of information from vocabulary to practices.
Cheers!
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