Classic Investor Mistakes, Part 2 – MMV305

March 23, 2016 Leave a Comment

Three more classic investor mistakes for you in this video. Plus, I do go on a short rant. Sorry about that…

(For the first three mistakes, click here)

Mistake number 4 – Watching your portfolio too closely

With apps and logins, it is now possible to check your portfolio every day, when we used to get a statement once every six months. or even once a year! I see the stats of my clients who log in to our platform. One client was logging in several times a day!

I have several things to say about this:

• If you're invested in funds, the price probably only changes once per day, so there's no need to check it several times a day.
• There is nothing you can do about the things which move your portfolio, so there's no sense in checking it as often as you do.
• Checking often leads to anxiety because you see the day to day fluctuations in sharp relief.
• Investing is a long term game, so why worry about the short term?
• Stop checking so often!

Nuff said, really.

Mistake number 5 – Paying too much in fees and tax

There s no bigger drag on investment portfolio than expenses. These come in the form of fees and tax.

Fees

Fees come in several forms:

• Platform fees
• Transaction fees, e.g. dealing, entry and exit costs
• Fund management fees
• Adviser fees

With the latter, an adviser should always justify their costs, but then I would say that 😉

Be aware of all the costs at all levels of your portfolio and reduce them where you can.

Tax

We all pay some tax, but there are things you can do to minimise the impact that this has on your portfolio. This isn't the place to go into these in detail, but the key thing is to plan ahead. It makes no sense to blithely let your portfolio do its thing, and then not be prepared for a tax bill you could have seen coming. Stay alert and look for ways to mitigate tax as you go along.

Mistake 6 – Thinking you know what you're doing

In the video, this is where I rant a little bit. Here I'll keep it simple:

Unless you are investing full-time, with a team of analysts behind you, and you're on the ground in the City of London, and you have 20 years of experience at least, you probably don't know what you're doing as an investor.

Sorry to be blunt.

So leave it to the experts instead. And you might as well remove the risk of choosing the wrong fund manager and opt for low-cost index funds.

I have three more investor mistakes for you coming on Friday, so stay tuned!