Don't Decide To Become A Short Term Investor

While the constant flow of bad news, comparisons to the depression, and the seeming ineffectiveness of government intervention is hard to ignore, ignore it if you are a long term investor with a proper game plan. The single biggest mistake long term investors make is to become short term investors part way through their long term plan.

One of the next biggest mistakes people make is to grossly overestimate their tolerance for risk. Getting this wrong doesn’t necessarily mean your properly diversified portfolio is wrong, it’s just probably wrong for you. You need to talk to your advisor about when might be an appropriate time to make any changes if it keeps you from sleeping at night – together you might decide to wait until after your portfolio recovers to make any changes (in order to fully participate in the recovery), while others may opt to make changes now because the worry of waiting for that recovery is too stressful.

I’d recommend revisiting an earlier post on “An Example of How Reacting in Fear Can Hurt Portfolios“.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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