Successful Investing – Helping Investors Avoid Common Investment Mistakes

The Top Mistakes made by Investors

In my dozen plus years of advising individuals and businesses I have found a number of common mistakes that have derailed even the best laid financial plans. I thought by sharing them I might be able to help others sidestep the pitfalls and the negative impact they can have on your portfolio and long-term financial plans.

1. Failing to establish a time horizon and investing accordingly -

If you have expenses that need to be funded in 3 years or less, you should not be investing the cash for them in the stock market or other risky investments. These monies should be carved out of your investment portfolio (the money earmarked for long-term investing) and invested appropriately in liquid assets such as money market funds or term-certain fixed income offerings. If the money is not going to be needed for 3 years or more, an investment plan should be established based upon specific a time horizon and risk tolerance for these funds.

2. Failing to thoroughly diversify your portfolio -

Many investors know about the concept of diversification and think that by owning different investments, they are diversified. Diversification of an investment portfolio makes good sense on an intuitive level. However, it wasn’t until Harry Markowitz published his model of portfolio selection that this concept became a formalized part of sound investment practice and formed the basis of today’s Modern Portfolio Theory. Beyond this basic concept of diversification, the key to Markowitz’s premise is the revelation that the risk of any investment can be reduced and/or performance increased by forming a portfolio of diverse and non-correlated assets. That is, it is important not just to seek a diversity of asset types, but also to seek assets that have low or near-zero correlations to one another. It’s not about owning different investments; it’s about owning different, non-correlated investments.

3. Letting potential tax implications rule your investment decisions –

Many investors delay selling an investment that has done well regardless of how good or bad the future looks for the holding. Their response is, “I will have to pay taxes if I sell.” By not selling, they set themselves up for not having to pay taxes at all – usually because the investment starts on a decline and their concern switches from “having to pay taxes” to one of “hoping for a turnaround.” Don’t be afraid to take some profits off the table. While taxes are an unpleasant result of investing, I prefer to look at them as a positive sign as it indicates you are making money and your investment plan is working.

4. Buying a stock based upon a “hot tip” -

Too many investors listen to a friend’s advice because he or she always seems to have the next “great” money making idea. They don’t take the time to assess the idea personally and jump in because it’s only a few thousand dollars they are investing. Unfortunately this is not investing – it’s gambling. If you want to gamble, go to Vegas and at least get free drinks, dinner, a show and a room for the risks you are taking. Any investment that is being considered for your portfolio should be thoroughly researched and have passed a comprehensive financial screening scrutiny.

5. Attempting to time the market -

Waiting an extra day, week, or month to try and buy in at the “right price” just doesn’t work. No one can predict the future. If they could they most likely wouldn’t be sharing this knowledge with you for free. Successful investors use time, patience and a disciplined approach to increase the likelihood of maximizing their investment returns – not trying to time the market. If you have done the research and the investment is sound and meets your criteria then buy it, regardless of timing.

6. Failing to regularly reevaluate your investments -

Over time all investment styles, strategies and types fall out of favor. So, like timing the market, it becomes virtually impossible to know what is going to be “hot” in the next bull market and what isn’t. For this reason it is always prudent to stay up-to-date on your investments to insure they are still the same investment that you originally purchased (segment drift and manager changes can be one reason they may have changed). If your investments consist solely of mutual funds then an annual review is a good place to start.

7. Basing investment decisions on emotion -

Maybe the stock market is going through a bad time because of a short-term geo-political or economic event. Stay calm and make an educated, well thought out decisions about what, if anything, to do. Assess whether the event will affect the economy long-term or if it’s just a short-term blip. The best move is often no move at all. If it is a short term incident, many times the smart, prudent investor will make additional investments because the current decline provides them with an excellent buying opportunity. The key to successful investing is to have a disciplined strategy and to stick with it.

8. Cashing out gains and dividends rather than reinvesting -

Once you’ve realized gains or had distributions and dividends paid out, insure they are reinvested back into your portfolio. If you pull out your capital gains, dividends and interest, your money won’t compound as quickly, thereby leaving you with a smaller chunk of change down the line. Letting your investments compound is one of the major tenets of successful investing.

9. Owning too much employer stock -

Many people get over-weighted in employer stock because of options and stock purchase plans made available in today’s competitive compensation packages. While these are great supplements to their annual salary they can put an employee in a position of having too much money invested in their employer’s stock. Additionally, it is quite common for people to invest in “what they know” and what do you know better than the company you work for? To compound the problem many people will add more employer stock to their 401k holdings and individual brokerage accounts. Not only does this create a diversification problem in their portfolio but it also subjects them to excessive single stock risk. A good rule of thumb to follow is to insure that no more than 5-10% of your entire investment portfolio is in any one single stock. If you find yourself in this situation the importance of creating a well thought out reduction strategy cannot be overstated.

10. Following the herd -

The most successful of all investors are moving in the opposite direction of what everyone else is doing. They buy when most are selling and sell when everyone else is buying. By following this simple plan you can preserve your capital and potentially sidestep the next bubble (can anyone remember real estate, internet stocks, and technology growth funds?).

11. Not investing at all –

Somehow in today’s society that Mocha Cappuccino Latte seems to take precedence over saving for the long-term. We are a society who wishes to satisfy the “here and now” rather than the securing our future. The important fact here is that those two are not mutually exclusive. In fact, BALANCE is the key in any long-term endeavor, but by always keeping an eye on the end goal you can make sure it is not out of mind while satiating the here and now.

12. Investing without a plan -

Investing without a plan and lacking the discipline to follow it is a sure way to lower your chances of success. The chances of obtaining any long term goal can be greatly enhanced by creating a strategy, following it and regularly reviewing it frequently enough so it reflects any changes that have taken place since implementation. Many investors start off with a small amount of money and start putting it to work without a plan. As time progresses they find they have a mish-mash of investments in their portfolio with no clear strategy or direction. It’s never too early to invest but it’s even better to invest early with a plan.

13. Taking too little risk -

Some people don’t want to take any risk and cannot stand the volatility involved with risky investments. While it may seem like you are keeping your money safe and secure by not taking risk, it is more than likely you are not because of inflation. If your time horizon is greater than 5 years it is recommended that you have no less than 25-30% in growth investments (i.e. stocks) in your portfolio to ward off the effects of inflation. The actual percentage to own is dependent upon many factors including but not limited to age, time horizon before money is needed, current financial situation, etc. A good general rule of thumb to use as a starting point for the percentage of equity you may include in your portfolio is “120 – your age.”

Affiliate Marketing: How to Capitalize on The Growing Digital Economy

In today's world, as long as you have an internet connection and a laptop or smart device, you can build an online business around your interests and run your business from anywhere in the world. You can begin your online journey while going through a step by step training process that will give you the knowledge and skills you need to in order to build your own flourishing online business without the necessity to create a product of your own.

Becoming an effective affiliate marketer understands learning how to generate traffic, build highly targeted subscriber lists, communicate with prospective clients, build websites, and promote high-quality products numerous all media platforms that range from low to high-ticket. Many affiliate programs available provide training that focuses on developing these skills, which will provide all the necessary ingredients for success as a digital entrepreneur in any market.

Utilizing the digital business systems can get you the most up-to-date marketing education, world-class product funnel, state-of-the-art tools, technical support and access to a helpful community to get yourself on track with your business And building your ideal lifestyle. The best part is there is no limit to the number of companies or products you can market. Once you learn the basics, you are free to choose what, where and how you want to advertise.

The education modules provided in more valuable affiliate programs are designed to be practical, hands-on and bite-sized. In order to make learning fun and actionable, each step is clearly explained and supported is available every step of the way. You should expect to benefit from the advise of experienced business system specialists and marketing experts. There is always someone available accessible to help you with along your journey. In every aspect of your training, you'll receive the tools and guidance to improve your mindset and scale your business, giving you significant momentum.

Some of the benefits of the best affiliate programs are as follows:

(1.) Step-By-Step Training: An intensive supply of video tutorials, downloadable reports and training resources focused on online marketing and building internet-based businesses.

(2.) Personal Business Consultant: A professional digital entrepreneur who will serve you every step of the way and act as a guide for you, so that you can build your new business or scale your existing business stress-free.

(3.) Live Webinars: Video-based conferences along with excellent technical support that are organized to ensure you are kept up to date on the latest strategies, trends and events regarding internet marketing.

(4.) Exclusive Members-Only Community: People just like you from every part of the globe who are at various stages of developing their own internet-based business, as well as expert digital entrepreners and various internet marketers that provide a support system for One another to help us all achieve our goals.

(5.) Ready-To-Use Digital Platform: A ready, but customizable set of tools and services that include, but are not limited to: website building, web hosting, graphics builder, report creator, tracking software and pre-designed Landing and sales pages.

(6.) Proven Sales Funnel: An integrated product suite that will allow you to start marketing from day one. This way you can generate income without having to create your own product if you choose not to.

As you implement and master your marketing skills, you will be able to gain time-freedom, you'll enter the world of self-employed and self-reliant entrepreneurs, and will have complete control over your life.

Naturally, business results will vary based on the individual. The goal of these digital business systems is to help you get quality education, access to the cutting-edge online business system and tools that will help you get started in growing your online business, but the time and effort you exert will determine your success level . You and you alone are responsible for your achievements.

We are passionate about helping people reach their goals, so we're giving away a free online-business video tutorial series to introduce you to the world of internet marketing and kickstart your education. This video series is the most effective educational model and affiliate program we have come across, and is the same one we used to begin our online journey.

Complete Guide to Facebook Marketing

Unless you've been living on another planet, you would be aware of the popularity and influence of Facebook today.

Just a few short years ago, you had to encourage all your family and friends to join this social networking website (just after others convinced you to join). Nowadays, it's rare to find someone who has not gotten a Facebook account.

At last count, there were over 350 million users on Facebook and this number is continuing to grow. It overtook MySpace as the number 1 social networking website on the planet last year and is just behind Google when it comes to online traffic. You are then able to understand how important Facebook marketing has become for all websites.

It's Not A Pitch Zone

The most important thing to remember about social media is that it is not a place to blatantly and endlessly pitch your product or service. If you do this, then you will not get any favors from social media users and will get poorly ignored and even bad reviews.

What social media is used for is building relationships with potential clients. There are several ways you can go about doing this:

– you can post helpful information (links) where you help them solve a problem
– you can personally chat with them and assist them you can create content addressing the needs of users and posting it

The bottom line is that you want to be seen as genuine and helpful. This way, word can get out that you're the real deal and before you know it, people will become interested in what you have to offer in terms of products and services.

Of course, the things you share on social networking sites such as Facebook should not be the nitty gritty stuff that you have to offer. You should share helpful information in the form of teasers that will interest people enough to ask and wonder if there's more. Offering free stuff is great for getting attention too.

How To Market On Facebook

The great thing about Facebook is that from the outset, it has encouraged all users to use the website as a means of sharing information and marketing whatever they please. As a result, it has developed many ways for users to do this. You do not have to use every single one of them but a combination of them can only enhance your Facebook marketing.

Pages

This is probably the marketing tool out there on Facebook. On its website Facebook describes Pages as "a public profile that enables you to share your business and products with Facebook users." It is specifically designed for promoting a business and everything it has to offer. People can then become a fan of your page and when they do this, they let their friends know that they've become a fan of your page via their News Feed. The potential for your Page to gain a lot of popularity in a small period of time is great.

Of course, it all depends on the content you put out there for people to use. You need to give them a reason to become a fan of your Page and a reason for them to keep being one.

Events

This allows to create events to be held at a certain date and time. Depending on what type of business you are, you can create one to be held locally or internationally. It can be any one of the following:

– seminar – it should be introductory and free but you could promote a paid one too
– webinar – an online seminar and where anyone worldwide can join
– product / service launch – you may be about to launch a product or service and this is a way to gain attention

The best part about creating an event on Facebook is that it can go viral and before you know it people will be attending your event in droves.

Advertising

Finally, about a year ago, Facebook introduced an advertising service where people can put ads promoting their website or their Facebook Page and they pay per click (PPC) or impression (CPM). It works in a similar way to Google AdWords.

The best thing is that you can target your ads based on both geographical locations and social actions. For example, if you were a wedding photographer and wanted to promote your services, your ads can be set up to appear only to females between the ages of 24 and 30 and who relationship statuses indicate they are engaged.

It must be noted, however, that Facebook Advertising is still in beta mode which only means that it will only improve in the near future.

Embrace Facebook

If you wanted to market your website online, you would be absolutely nuts not to use Facebook marketing as one of your key strategies. Just be careful not to get talked up in it too much because it can become a very time consuming activity.

How To Start Investing For Financial Independence, Part 1

Today, I am going to start a multi-part series about how to go from being a beginning investor to being "financially independent" in a steady and predictable way. At our website, we get tons of e-mails about how do I start, how do I start with little $ 's, etc., etc., etc. If you are asking this question, congratulations because you are ahead of most. All of us have been there at some point.

I must warn you …. What I am about to share here for free is what "gurus" across the nation charge thousands of dollars for in weekend seminars. The "secrets" disclosed are going to seem pretty simple because quite frankly, there are no secrets. The methods used here have been done for centuries and there is no real reason to complicate them. Let's apply these principles to see how fast someone might become financially independent without betting the farm.

Realize that everyone has wildly different starting points and different financial goals. For this series of articles, we assume that an individual has access to at least $ 15,000 liquid capital (or home equity) to start, is at least breaking even with their current income income expenses, and has decent credit to obtain financing. Note there yet? …. See the footnote below.

To start, what you need is to make your money grow while keeping your current income stream, and current expense level in place. I can not say this more plainly ….. To change your current financial path, you have to us your money and your time to grow additional income streams that increase wealth. There is many ways to do this but we are going to use investing in real estate as an example.

Now for beginners, here is the really bad news …… As an investor, you reap rewards by placing your money in HARMS WAY. You do everything in your power to minimize your risk but bottom line is that real investors make money by taking CONTROLLED risks. As investors get better, they learn how to make fantastic investment returns doing things that all their friends and relatives thing is crazy ….. However, they know exactly what risks are small in comparison to the potential Rewards.

One reason people really like real estate investing is leaseage; Ie, you can purchase an expensive property using 0-20% of your own money while financing the rest. So if you put 10% down for example, and then the property goes up by 20%, you have made a 200% return (ignoring expenses, taxes, etc. for simplicity). Of course this works in reverse … If the property drops by 20%, you have lost not only your original investment but have to come up with another 10% as well ….. Ouch!

For someone beginning, here is what I would suggest:
1) Look for an opportunity that will return at least 150% in 2 yrs or less;

2) Be mentally and financially prepared if the investment does not work out;

3) Have VERY good reasons why you do not think you will lose money …… You may not make as much as expected but you would rather not lose money at this stage.

4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan.

In our Mastermind Group, we are bringing out a land project (see related article Land Investing that appears to meet these criteria (each investor has to decide for themselves.) So let's say the purchase price is $ 150,000, with 10% down and another $ 3,500 In closing costs. With good credit, then the financing obtained would make the land payments for 2 years while waiting for growth.

Now let's say after you did your analysis, looked at what had happened in the past, looked at why you thought more and more people would want this property, etc., you decide that you think this property will average 20% / Yr escalation over The next 2 years. MORE IMPORTANTLY, you decide that barring a major meltdown in the market, you think there is little chance that you can not at least break even after 2 years.

So if you end up being right about the growth, then you might net a tidy $ 43,000 (before taxes) or so after everything is considered. After long term capital gains at 15% let's say, then you just picked up about $ 36,000 of the "market's money". That is money that if you take a loss on the next investment will not be nearly as painful as if you lost your original money. When you combine this with your original investment amount, you now have around $ 55,000 of operating capital for step 2.

Realistically, you can not predict how much you will make from the investment. When I invest, I try to establish in my mind what is reasonable. Frequently, I have been surprised to the positive and made much more than expected. Sometimes I have made less. The key being put to yourself in a low risk situation where you have a strong reason to believe the market will go in your favor.

To accomplish this first step, let's look at what you really had to do:

1) Had to be willing to put $$ in harm's way;

2) Had to educate yourself enough to evaluate the risk and the opportunity;

3) Had to find the opportunity or be in a position to have the opportunity presented to them;

4) Had to act.

I would like to comment on the education side. As a former professor, I have seen very smart people spend 1,000's of hours and 10,000's of thousands of dollars educating themselves to "earn a living"; This is a great move in many cases. On the other side, I have seen very smart people who want investing to be a major source of income but will not spend any time or any money educating themselves.

To me, this is a recipe for disaster. By the time we finish this series, you will see that with a few simple steps, implemented over time, many people can easily produce more money than their regular job. Tomorrowmore, many people will put 100's of thousands of dollars at risk but know almost nothing about what they are doing. If you chose the path of making your investment dollars grow steadily with time, I hope this does not end up describing you.

** Footnote: If you are not yet at that level, here is what I suggest. First, read Michael Masterson's book called "Automatic Wealth". This is an excellent book on how to quickly change your financial position while staying employed. Next, I would read Van Tharp's new book called "Safe Paths To Financial Freedom". Van uses a very different thought process from many and so adds a great deal of rounding. Like anything else, you will not agree with everything written in these books but they provide some great thought processes. When you have some capital and are cash flow positive, they come back and revisit this article.