You probably can think of one or two mistakes you've made with your finances or investments in the past. Don't worry about them. Instead, you should be more concerned about identifying the mistakes that you don't know you are making. The following 10 mistakes are among the most common and costly errors that people make with their investments. They are also the kinds of mistakes that can be hard to identify unless you know what they look like. Once you spot them, however, it can be relatively easy to make changes that will help clear up any problems and get you back on the road to meeting goals, such as a comfortable retirement.

1. Mistake Number One: Trying to Time the Market
   For decades, financial experts have been trying to find a way to predict when the stock and bond markets will rise and fall. Many investors are tempted to join that search, in hopes of selling their investments before market declines and then investing again in time to catch the market recovery. Unfortunately, investors who try to time the financial markets usually end up falling behind those who simply hold their investments through thick and thin. One reason is that the stock market's historical tendency to rise over time favors such a buy–and–hold strategy. Stocks climbed in more than five out of every seven years between 1926 and 2003 — a difficult record for market timers to match. Of course, past performance does not guarantee future results.(Source: Standard & Poor's. Past performance is no guarantee of future results. Stocks are represented by the S&P 500, an unmanaged index generally considered representative of the large-cap U.S. stock market.)
2. Mistake Number Two: Buying the Most Popular Investments
   When a particular mutual fund or other investment is setting the world on fire, it's tempting to invest heavily in it. But such popularity may cause an investment or an entire financial market to rise to unsustainably high levels — and the risk of a sharp decline grows when that occurs. Thus, investors who pile into today's high–flying funds might end up with losses tomorrow.

3. Mistake number three: Making Short–Term Investment Decisions
   Some investors are tempted to make short–term bets on particular funds or financial markets, based on today's economic news. But the factors that drive investment results are complex, and play out over long cycles. It is much simpler — and usually safer — to base your decisions on the long–term outlook for an investment.
4. Mistake Number Four: Taking Too Much Risk
   Mutual funds and other investments that offer the most potential for long–term growth often carry considerable risk. There's nothing wrong with taking on that risk, as long as you are willing to ride out significant fluctuations in the value of your investments. All too often, however, investors attracted by the chance for significant gains invest heavily in funds or other assets without understanding the risks they carry.
5. Mistake Number Five: Taking Too Little Risk
   Some investors aren't willing to risk even modest short–term declines in the value of their holdings. As a result, they stick with the most stable funds — which typically offer only modest investment returns. Such returns may not be sufficient to stay ahead of inflation over long periods and may thus leave you short of the sums you need to accumulate to help you meet essential long–term goals.
6. Mistake Number Six: Failing to Diversify
   A portfolio that is dominated by one fund or asset category will be almost entirely dependent on its performance from month to month and over the long haul. If that investment fails to keep up with inflation or experiences a sharp loss due to a market decline or other problem, you will suffer accordingly. But a portfolio that combines a mix of different investments may benefit from that diversity when one investment stumbles.
7. Mistake Number Seven: Ignoring Tax Consequences
   Ever notice the enormous difference between your salary before and after taxes? Taxes can drastically affect your investment returns. Anything you can do to reduce the taxes you pay now on your savings and investments can help make a major difference in your ability to amass a solid retirement nest egg. Example: When you invest part of your salary in your company's retirement savings plan, you postpone taxes on that salary until you withdraw the money. Meanwhile, it can go to work earning returns for you. Yet some investors pass up that opportunity, instead investing in other long–term accounts that carry no tax benefits.(Early withdrawals may be subject to an additional 10% tax penalty.)
8. Mistake Number Eight: Saving Less Than You Can
   Saving more is always a challenge, but it's one worth meeting. Moreover, even small additional amounts can make a big difference. For example, if you save an extra $50 a month (around $12.50 a week) in your company savings plan and earn an 8% annual return, you can accumulate an additional $29,647 in 20 years — and $75,014 in 30 years. Chances are, that weekly $12.50 slips through your fingers on things that don't matter much. Isn't it worth giving them up to help secure a comfortable retirement later?(This hypothetical 8% example is for illustrative purposes only and does not represent an actual investment return.)
9. Mistake Number Nine: Investing Without a Plan
   When you consider your investment options one by one, it's easy to find some that you like more than others. Perhaps one fund has a terrific long–term record, or invests in a part of the world that you think offers great promise to investors, or provides just the kind of stability you like in an investment. However, if you simply pick your favorites you'll end up with an investment portfolio that may not meet your needs. Instead, you should create a retirement plan that is based on your long–term goals and your risk tolerance, choosing a mix of funds that can work together to address those needs.
10. Mistake Number Ten: Worrying Too Much
    Once you have a retirement savings strategy that makes sense for you, don't spend too much time worrying about the month–to–month fluctuations of your portfolio. Such movements are a natural part of economic cycles that have been occurring for centuries — and there's nothing you can do to stop them. Instead, check on your portfolio from time to time to be sure that it still is appropriate for your changing circumstances and goals. Make necessary adjustments as needed, and go back to enjoying your work and your family. Your future is important — but perhaps the biggest mistake of all is to worry about it so much that you miss out on the satisfactions of the present.

Used with permission from www.nylim.com

NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054.
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