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On this episode of Tape Talk we take a look at five big mistakes investors are making in today's market environment. 

 

Passive Indexing

With the recent history of steady gains in the major equity indices, many investors have become a fan of investing in index funds. The upside to this is many investors are paying significantly less in fees than they ever have before. The downside is that many investors still don't know what they're invested in, how an index works, or whether or not they're overweighted in any potentially overvalued sectors of the market.

 

Chasing Yield

Life is tough in today's economy for those who require a steady yield from their investments. With the 10-year Treasury trading near the level of inflation, investors have begun stretching out into more fringe investments to fill the yield side of their portfolio. This began with things like high-yield "junk" bond fund but has now moved to high-yield equity investments. These are far from the blue chip company trading at a 4% yield. What we're talking about here is the 8-25% yielding investment that investors assume has little risk of principal loss or a slashing of yield when the truth may be just the opposite. 

 

Social Security

 

There's a lot of factors that go into the decision of choosing when a person should begin taking their social security and yet the decision is often made emotionally rather than objectively. As most people's only form of a pension in today's retirement world, it becomes even more important to run the math and work with an advisor to ensure you're putting yourself on the social security path that is best for your individual circumstance. 

 

Annuities

With many investors having become risk averse as stocks have notched new highs seemingly monthly there's been a search for ways to lock in guaranteed return with little to no volatility. Unfortunately, volatility is what creates the compound returns in the stock market. The alternatives that some investors switch to might be full of restrictions and fine print which they hardly understand or don't take the time to review.

 

Market Timing

Even after eight years since the S&P 500 bottomed during the great recession, there's a caution among many investors who wish to never see their capital be exposed to volatility like that again. This results in their participating in the market in fits and starts while they attempt to call the next market top and put their money back in during the next generational bottom. This hyperactivity though can often just result in missing much of the returns required to meet an investor's goals.

 

 

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