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When you’re investing your hard-earned money, your biggest fear is that you’ll lose or reduce your investments, thus ruining your dreams of happy, worry-less retirement. But there are ways you can have peace of mind and mitigate the risks that are involved in investing. Below, we’ll discuss 5 common, yet surprising reasons investors lose money on their investments.
1. No portfolio diversification
Now before you huff “My financial advisor assured me that I am diversified” or “I don’t have all my eggs in one basket,” remember that diversification means you invest in all or most asset classes, such as bonds, stocks, real estate, and commodities, to create a balanced investment portfolio. Lack of diversification puts your investment at risk because it’s tied to just one or two asset classes. Many investors’ portfolios contain only paper assets—stocks and bonds—and are not diversified with safe-haven assets such as gold, which act as a hedge against financial crises.
Generally, you want to include assets that are uncorrelated or inversely correlated, meaning that one asset typically goes up when another asset goes down. This lowers or even cancels out the risk to your portfolio when, for instance, the stock market crashes.
As the chart below shows, gold is the asset that’s the least correlated with typical investment assets like stocks and bonds:
Diversifying your investments is key to your success, and by allocating a portion of your portfolio to precious metals, you can protect and even build your wealth when other assets tumble.
2. Not investing for the long term
When you’re investing for your retirement, you’re investing for the long term. Therefore, you must set long-term financial goals for your portfolio by asking yourself questions such as:
- When do I want to retire?
- How much money do I need for my retirement?
- How do I protect my retirement savings both before and during my retirement?
Once you’ve decided how to invest, you need to monitor your investments and always have your long-term goals in mind.
However, many investors get caught up in the movements of individual assets—for instance, when a particular stock suddenly spikes or drops. But the key to a successful long-term investment is to stay true to your goals.
Don’t try to time the market—it’s been shown time and again that long-term compounding gains achieved via stock price appreciation and dividends outperform the nominal gains achieved via day-trading and short-term holds. And, make sure you’ve protected your portfolio by diversifying with assets such as gold, which hedge your wealth against market turbulence, inflation, and political turmoil.
Warren Buffett once said: “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” This applies to all assets in your portfolio, including gold.
3. Not enough knowledge about what they’re investing in
When choosing to invest their hard-earned money in any asset, it should be obvious that investors research the asset and how it fits their portfolio and their investment goals. However, many investors don’t take the time to gain a solid understanding of how each asset class performs in different scenarios and what factors influence the asset’s price.
Speak with your financial advisor and ask questions about your investments—not just when you initially invest but also along the way so that you can ensure that both you and your advisor stay on top of developments in the markets and the economy.
At Gold Alliance, your dedicated Sr. Portfolio Manager has years of experience with investing in precious metals.,We see it as part of our mission to ensure that our clients have the latest and best information available to them so they can make decisions that fit their goals. Don’t hesitate to ask us any question that comes to mind—we are here for you.
4. Getting caught up in media headlines
As part of staying laser-focused on their long-term goals, investors need to be wary of getting caught up in bold media headlines. Every day, some asset, stock, or company is being hyped in the media (lately, you’ve surely read about Tesla and Bitcoin), and sometimes an entire industry is being put in the spotlight as the next big thing (the tech industry, for instance). And the headlines often entice people to invest in those assets—they don’t want to “miss the boat.”
But keep in mind that you, as an investor, should be cautious about acting solely on such hype. Following the hype when making investment decisions for your future isn’t a sound or well-thought-out strategy, just a knee-jerk reaction.
What goes up fast often goes down fast too. As an example, today’s stock market is extremely overvalued, and many leading market analysts and hedge funds state that it’s only a matter of time before we see a significant market correction. Buying stocks in a company because of the hype surrounding it could prove very risky. Some investors even buy into the hype with borrowed money, further increasing the risk of losing a significant part of their wealth.
5. Not starting early enough
It’s never too late to get started on investing—but you shouldn’t postpone it either. Yes, it can seem overwhelming at first to get more involved in investing, but you most likely already have a retirement account through your employer, and many Americans have other retirement savings as well.
The earlier you get started, the better. Speak with your financial advisor regarding your paper asset investments and with us about your precious metals investments on a regular basis—it’s good to do a review of your investments and your goals once a year. That way, you can ensure that you’re staying in the loop and that your investments are positioned optimally.
A crucial step in your investment planning is to make sure your wealth is protected. As we discussed, your financial advisor doesn’t offer physical gold or understand it, so they don’t recommend it.
However, gold has a proven track record of protecting and growing wealth for thousands of years, and diversifying with gold could mean the difference between success and failure, thus ensuring that you and your family have more than enough to last you through your retirement years.
At Gold Alliance, we make every effort possible to help you through the process of rolling over funds you selected to protect and grow into a Gold IRA. From your first contact with our staff to your consultations with your dedicated portfolio manager, you will be met with a warm and friendly atmosphere where you will feel comfortable asking any questions you may have and get straightforward answers in a pressure-free environment. And we have made the process of establishing a Gold IRA easy: it just takes three simple steps, and we’ll be there throughout the process to assist you so you can make the best choices for your retirement savings.