e 8 Biggest Mistakes Made When Designing Investment PortfoliosWritten by Scott P. Frush, CFA, CFP
Are you as good an investor as you think? Do you consider yourself a well-informed investor able to anticipate and avoid nearly all pitfalls associated with investing? Chances are, you are making one of common errors that could cost you hundreds or even thousands of dollars, or worse yet, your financial independence, control and security.“I see people making same costly mistakes over and over,” says Scott Frush, investment advisor and author of Optimal Investing: How To Protect and Grow Your Wealth With Asset Allocation (Marshall Rand Publishing; available by calling 1-800-247-6553). ”But small leaks can sink great ships.” Here Scott Frush shares eight common, yet costly, mistakes investors make when designing their investment portfolios and reveals how to avoid them. 1. OMITTING APPROPRIATE ASSET CLASSES AND ASSET SUBCLASSES. Numerous landmark studies have concluded that how you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines majority of your investment performance over time. As a result, make every effort to allocate your portfolio to all appropriate asset classes and asset subclasses. 2. SELECTING INAPPROPRIATE ASSET CLASS WEIGHTINGS. By selecting inappropriate asset class weightings a portfolio may earn a lower return and experience greater risk than expected. Consequently, be careful not to over or under weight any asset class, thus enhancing your portfolio’s risk and return trade-off profile. 3. UNDERESTIMATING THE IMPACT OF INFLATION. Inflation can erode real value of your portfolio over time, thus placing your future financial security at risk. As a general rule, longer your investment time horizon, more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.
| | Choosing A BrokerWritten by Scott Ervin
Finding The Right Broker Ok, so you have done some research on futures markets, and have decided to try your hand at trading. You have by now evaluated which contracts to trade, either by interest in a specific market, or by your belief that you have good information on future market moves through your job, or contacts you deem well informed. The next decision to consider then, is choosing a broker. The current trend in brokerage houses is to offer rock bottom commissions on round turns, but very little in way of information or support services for their customer base. Although this option is good to have, there are certain issues to consider when looking at these types of brokers. The first realization you should have is an old adage that still holds true, you get what you pay for. Though some traders are experienced enough, and pay for enough outside research to make use of these discount services, most of us will need a lot more help from a professional to be successful long term. With most discount brokerage services, you are on your own. So then, what is alternative? Full-service brokers can be a good alternative for novice or intermediate level trader. The basic idea of full service broker is relatively simple, he or she should be a person who is well informed, accessible to you, and able to help you avoid some of common mistakes made while trading. Additionally, a broker who is good for you should be well informed on markets you are trading, and able to give you recommendations when you're struggling with market strategy. If you have traded before, you probably also know value of having someone reliable to resolve issues dealing with problems with your equity statements, margin, or any other possible office error. The full-service broker should take care of details and problems, leaving your mind free to focus on trading.
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