If the Federal Reserve pursues an exit from its ultralow interest rate policy, are you prepared to exit the stock market should things turn south? A certain group of investors say theres no way the Fed will pull off an exit. It turns out we sympathize with that view but think getting ready for it is still paramount. This is because just the hint of a Fed exit might cause havoc in the market. Though its a lot easier to say what not to do than what to do, here are five common mistakes investors make: 1. Feeling as if youre losing out because youre not keeping up with the stock market. No: You should develop a financial plan tailored toward your circumstances. You should not care how much the guy or gal next to you, or the market, makes. 2. Feeling as if you havent saved enough for retirement and as a result should invest in the stock market to make up the shortfall. No: Warren Buffett got to the point when he said, The stock market has a very efficient way to transferring wealth from the impatient to the patient. The prudent investor waits to find good values; the impatient investor is bound to invest at the top by chasing trends. 3. Feeling as if you cant invest more because you dont make enough money. For most, spending - not income - is the problem. Just because you can buy the world with a push of a button doesnt mean you should. Remember back in college, when you could live off very little? Spending $80 a month on a phone bill is a luxury, not necessity. 4. Not devoting time to researching investment options. Many people spend more time researching which high-definition TV to buy. You worked hard to earn those saving-now put some effort into determining what to do with them. 5. Not understanding true diversification. Diversification is not about labels, but correlation. When policymakers are very engaged in the markets, asset prices may no longer reflect fundamentals but instead the next perceived intervention. Im personally concerned about a crash and am taking precautions. I encourage equity investor to consider a strategy that employs some sort of hedging or protection; like a fixed index annuity. If the markets continue to soar, this lets you participate in some of the upward move. If you ask me for my favorite investment idea today, it is to get ready for a severe correction in the market. I like to have cautioned investor. Axel Merk is president and chief investment officer of Merk Investments.
Posted on: Fri, 19 Sep 2014 14:59:18 +0000
Trending Topics
Recently Viewed Topics
© 2015