Protecting your wealth is arguably more important than growing it. Even if you make smart investment decisions, pay yourself first, and put some money away for your retirement, there are still a number of common investing mistakes that could drain your finances dry. Don’t waste your hard-earned money on poor financial decisions — be prepared for success by avoiding these common investing mistakes.
Not Funding a Retirement Plan
As a Canadian, you have access to a number of retirement plan options, whether through your employer or through the bank. One of the biggest mistakes many people make is not setting up a plan in advance and adding the maximum amount to it every year. Why is this important? Because most retirement plans are tax-sheltered, so you can protect your money until after you retire and your tax rate declines. Besides the tax advantages, you might also be eligible for a match program with your employer. Some will match your contributions which is essentially free money (that will steadily grow over time).
Forgetting to Rebalance
One mistake most investors make is forgetting to rebalance their portfolio back to its target asset allocation annually. Without a routine check-up and rebalance, your asset classes could end up overweight or underweight, neither of which is a good thing for your performance. If this sounds familiar, contact a financial advisor to help get the proper allocation to increase your overall expected return.
Doing it All Yourself
Unless you have industry experience in trade and finance, it’s best to get a helping hand from a seasoned professional. An experienced financial advisor can help you understand all the relevant risks to you and your portfolio, including what the appropriate benchmarks are, which asset allocation will achieve your goals, and how to diversify for steady long-term gains.
Not Planning for the Long Term
Short selling and day trading can make you a lot of money, but it can also gut out your entire savings if the market takes an unexpected swing. Instead of chasing performance and focusing on short-term gains, you should create a long-term plan and stick to it. Having a sound investment plan is not as much fun as playing the market, but it’s much more profitable in the long run.
Not Creating an Investment Strategy
Investing is not just about growing your assets, it’s also about using cost-efficient structures and tax planning to keep more of your money. Without an investment strategy, you could essentially be missing out on much of your opportunity for growth. Therefore, successful investors are ones that ensure they operate under a prudent investment strategy — the best plans are not only ones that offer significant growth opportunities but also help to shelter against taxes and minimize risk along the way. Always remember that each individual will need a strategy that fits within their goals — no approach will work for every investor.
When you’re ready to move forward with an investment strategy that’s tailored to your specific needs, contact us at The Beacon Group of Assante Financial Management Ltd. We’ll create a plan and implement strategies by choosing the best-in-class products and services that will excel through the market’s ups and downs, creating long-lasting wealth for you.