It is common for investors to express uncertainty over their ability to manage their portfolios during prolonged periods of market volatility. But prudent investors understand that making sound investment decisions shouldnt be based on the markets twists and turns. Rather, these decisions should stem from an understanding of investment fundamentals and an awareness of the mistakes others have made. Keeping a few common mistakes in mind and steps to avoid them may help you as you work toward your goals.
Mistake #1: Maintaining unrealistic expectations
Theres nothing wrong with hoping for the best from your investments its human nature. However, you could encounter serious long-term cash flow problems if you base financial plans for the future on unrealistic assumptions. According to an August 2004 Gallup poll, nearly one third of 800 investors surveyed expected to generate profits of 10% or more in their portfolios during the next year. How does that anticipated return compare with actual historical returns? Based on data from Standard & Poors and the Federal Reserve, from 1926 to 2003, a hypothetical portfolio divided equally among stocks, ...
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