Worst Investment Mistakes

[Boomer1]

I saw the Tips and Picks article on this site, so I couldn't resist providing the top investment mistakes I've seen:

1. If it sounds too good to be true - it probably is. My parents listened to a broker who "had a few more openings on his investments paying 12%" (when the prime rate was about 8%). Right - classic pyramid scheme - pay the original investors with new money while you send the rest to Switzerland. Cost my folks at least $10k -- and the guy didn't even go to jail!
2. Be wary of "friends - 1". An acquaintance from church called with a unique opportunity to be in on the ground floor with a major religious organization's for profit web site. Some people ended up investing - the result, an ill-liquid, non-paying financial hole. Moral: keep it simple and just say no. Buy mutual funds instead.
3. Be wary of "friends -2". A friend calls with a unique new software company that is going to set the world on fire. You can be in on the ground floor! Morla: Don't invest in strange stuff- buy a mutual fund instead. You'll keep your money, and your friend!
4. Be wary of your own impetuosity. In my financial life the biggest mistakes I have been made relate to a lack of discipline. I can't believe i sold stocks as low as I did, and then bought them back as high as I did. Where was my plan! Moral to self: try not to get burned more than once on the same stock.

[ctyankee]

Couldnt resist adding this advice from Vanguard on the same topic:

6 Investment Traps from Vanguard
Here are Vanguard's top 6 Mistakes:
Here are six traps to watch out for:

Investing without a plan.
Underestimating the impact of fees and taxes.
Selecting investments before asset allocation.
Chasing performance.
Trying to time the market.
Not rebalancing your portfolio.

To see the article (copy and paste both lines of this link into a browser)
https://flagship.vanguard.com/VGApp/hnw/VanguardViewsArticle?
ArticleJSP=/freshness/News_and_Views/news_ALL_pitfalls_01242007_ALL.jsp

if this link doesnt work go to vanguard.com and type "top investment mistakes" in the search box.

[62andout]

Over the weekend Fidelity sent out an eNewsletter with an interesting article about the perils of hoarding cash http://personal.fidelity.com/misc/framesets/iwarticle.shtml?pagename=IW090327marebear. Its premise was that in past recessions the stock market's biggest gains came well before the recession ended. The strong implication was that people who were in all cash position lost out on the biggest gains in the stock market, which tend to come early and fast. Here is a partial quote from the article, which is well worth reading:
"As noted, the market tends to rise six months before the economy stops contracting, so waiting for good economic data to hit the headlines inevitably means missing out on the early stages of the rally."

So if you believe Fidelity, one of your biggest future financial mistakes could be staying in cash too long.