Ep #42 The Four Horsemen of Investing: Common Mistakes Explained by Freeman Linde
Certified Financial Planners, Joe Curry and Freeman Linde debunk the myth of chasing returns to understanding the dangers of market timing, we delve into the common pitfalls and behavioral biases that can hinder your investment growth. This thought-provoking episode combines real-life examples, expert analysis, and actionable advice to empower you with the knowledge to make smarter investment choices.
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What You’ll Learn in Today’s Episode:
1. The First Horseman – Chasing Returns - The Grass is Always Greener in Another Investment. Our propensity to constantly change our investments is killing us
2. The Second Horseman – Poor Diversification - All Our Eggs in One or Too Many Baskets. Both under-diversification and over-diversification can destroy our portfolios
3. The Third Horseman – Market Timing - Lose by Not Winning. You must be right twice to play this game, and most people lose on one side or the other.
4. The Fourth Horseman – Panic - The Big Mistake. Seeking to stop our losses, we sell at the bottom of a crash, turning a temporary decline into a permanent loss. There is no recovering from his Horseman. Avoid him at all costs.
Ideas Worth Sharing:
1. "The returns that investors get are often quite a bit different than the returns that investments get."
2. "By constantly chasing returns, constantly trying to get the best return possible, you end up with less return overall."
3. "Diversification means that you never hold enough of anything to make a killing on it, but you also never hold enough of anything to be killed by it."
5. "Over diversification can increase fees, create redundancies, and make it harder to stay committed to an investment strategy."
6. "Attempting to be in the market only when it's going up and to be out of the market before it goes down is a risky strategy that requires being right twice."
Resources in Today’s Episode:
3D Retirement Income: Creating a Retirement Income that Outpaces Inflation, Outlives You, and Outperforms Othershttps://retirementorship.com/
Retirement Planning Simplified
Maximizing Your Returns: A Step-by-Step Guide to Working with a Financial Planner
Join Certified Financial Planners, Joe Curry (Retirement Planning Simplified) and Freeman Linde (Retire Mentorship), as they explore “The Four Horsemen of Investing” and their impact on your financial success in retirement.
From debunking the myth of chasing returns to understanding the dangers of market timing, we delve into the common pitfalls and behavioral biases that can hinder your investment growth. Joe and Freeman combine real-life examples, expert analysis, and actionable advice to empower you with the knowledge to make smarter investment choices.
Whether you're a seasoned investor or just starting out, we provide the keys to maximizing your retirement investment returns by working with a financial planner.
In this article:
1. Identify your financial goals and objectives.
2. Research and choose a reputable financial planner.
3. Schedule a consultation to discuss your financial situation.
1. Identify your financial goals and objectives.
In the world of investing, it is not uncommon for individual investors to make mistakes that can hinder their long-term returns. One such key step to ensure that your investment portfolio is on the right track is identifying your financial goals and objectives. This involves determining guidelines and milestones for your investments that align with your personal financial aspirations. Once your plan is set, the test of discipline and commitment arises in the face of market fluctuations and unforeseen events.
Linde and Curry warn against the strategy of trying to time the market. They emphasize the importance of staying invested even during market downturns and trusting in your investment plan. Furthermore, they caution against chasing returns and the over- or under-diversification of your portfolio, as these can lead to diminished returns.
Moreover, They stress the significance of working with a financial planner, as these professionals can provide guidance and help clients navigate through investment decisions and maintain long-term perspectives. The importance of identifying your financial goals and objectives cannot be overstated, as this forms the foundation of your investment approach. Having a clear idea of what you want to achieve financially is essential in avoiding impulsive decisions and maintaining discipline throughout the investment journey.
Joe and Freeman warn against panicking and exiting the market during downturns which can be devastating to your long-term returns. By understanding your financial objectives and seeking the advice of a financial planner, individual investors can make informed decisions, avoid common mistakes, and achieve greater returns over time.
Remember, investing is a marathon, not a sprint - maintaining focus on your long-term goals and not getting swayed by short-term market fluctuations is vital to the success of your investment plan.
2. Research and choose a reputable financial planner.
A skilled and experienced financial planner can help you navigate the complexities of the investing world and help you create a personalized investment strategy tailored to your long-term financial goals. They can provide guidance on risk management, asset allocation, and diversification, as well as help you maintain a long-term perspective in the face of market fluctuations. With their expertise, they can not only help you avoid common investing pitfalls like chasing returns, over or under-diversification, and market timing but also set you on a more profitable path by making informed investment decisions.
Joe and Freenman use their personal experiences and emphasize the role a financial planner plays in helping clients avoid common investment mistakes. Linde reflects on his own journey with trying to time the market, which led to missing out on substantial returns. Joe and Freeman also highlight the importance of having a plan in place and sticking to it through ups and downs— another place where a financial planner's guidance can be invaluable.
Researching and choosing a reputable financial planner is vital for individual investors for a number of reasons. First, as previously mentioned, they can help you avoid major investment mistakes and guide you toward more informed and profitable decisions. Secondly, they help you maintain a long-term perspective, which is key to achieving greater returns over time. Thirdly, working with a financial planner can give you the confidence and peace of mind needed to stick to your investment plan, even during times of panic and euphoria.
Knowing that you have an experienced professional in your corner ensures you trust their information, and when faced with market fluctuations, you can stay level-headed and avoid reactive decisions that can have devastating consequences on your portfolio. In essence, having a reliable financial planner not only increases your likelihood of meeting your financial goals but also keeps you better informed and resilient when navigating the often volatile world of investing.
3. Schedule a consultation to discuss your financial situation.
When it comes to investing and retirement planning, one critical step to achieving greater returns and avoiding major investment mistakes is scheduling a consultation with a financial planner. This professional can help you assess your current financial situation, create a comprehensive long-term plan, and make informed decisions about your investment strategy. Financial planners have the knowledge and experience necessary to guide you through complex investment choices and help you develop a diversified portfolio that aligns with your financial goals and risk tolerance. By engaging with a financial planner, you are taking a proactive approach to managing your finances and setting yourself up for success in the long run.
Joe and Freeman emphasize the pivotal role of financial planners in helping clients circumvent common investment mistakes. Joe and Freeman highlight the psychological aspect of investing, as emotional reactions to market fluctuations often lead to poor decision-making. In these situations, a financial planner can offer objective and informed advice, ensuring that the client maintains focus on their long-term strategy and financial goals. Overall, Linde's insights underscore the added value of collaborating with a financial planner to navigate the complex world of investing.
Scheduling a consultation with a financial planner is essential for investors looking to avoid common investment pitfalls and achieve long-term financial success. A financial planner can provide invaluable support and guidance, helping you navigate diversification, resist the urge to react to market fluctuations and establish a solid long-term investment strategy. Without the expertise of a financial planner, investors are more susceptible to behavioral biases and emotionally-driven decision-making, which can significantly hinder long-term returns. By enlisting the help of a financial professional, investors can develop a well-rounded understanding of their financial situation, create an informed plan, and stick to their investment strategy. Ultimately, this key step is crucial for achieving greater returns over time and ensuring financial stability throughout retirement.
Achieving financial success and improved returns are within your reach when you work with a knowledgeable financial planner.
Begin your journey to financial wisdom and prosperity today.