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The 2 Worst Investment Habits That’ll Sink Your Portfolio (and Retirement Dreams)

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Jeff Cuellar

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There are many ways to reach your retirement goals in Singapore. Well, let me rephrase that – there are many BAD ways to reach your retirement goals in Singapore.

There’s the “I’ll save more when I make more” approach. There’s the “I’ll put my savings in a coffee can” approach. There’s also the “I’ll sell my HDB flat, downgrade and live off the profit” approach.

Then there’s the “TOTO” approach to building retirement wealth, which I sure as hell hope you’re NOT relying on.

One thing is certain though – if you want to retire comfortably after a lifetime of backbreaking work (or retire early), you must invest!

While investing can be your ticket to a fabulous lifestyle – it can also sink your “Titanic” retirement dreams faster than an iceberg.

Here are some sad investing habits you absolutely MUST avoid:

 

You Want to Experience the Thrill of Speculation

Yes, watching movies about “investors” selling and trading stocks can be entertaining – even though most of the time the movies portray fraud, insider trading and reckless speculation.

Unfortunately, the need to imitate what others do (especially mimicking what you see on film) is a regrettable part of human nature – and it’s one that can get your ass in some serious financial trouble!

While timing the market for short-term fluctuations and engaging in numerous stock trades each year is not illegal, it’s definitely a BAD idea for the following reasons:

  • Because it simply cannot be done – That is unless you have the unique ability to see the future so you can predict when a stock will rise and fall… or have a flux capacitor that allows you to travel through time.
  • Because it can actually cost you money in the long run – What happens you constantly try to “time” market fluctuations so you can make a little here and there? Simple, you lose out on fantastic long-term gains. For example, if you purchased a stock at a 6-month low of $20 a share and traded it at $40 6 months later because you saw its price slipping, you made a $20 per share profit. But if the price of that stock ended up jumping to $90 a share 5 years later, you just missed out on a cool profit of $70 per share.

So what’s the bottom line? Don’t get involved in reckless speculation because it gives you a “high” akin to gambling. When you play around with real money – your money – it pays to stick with the fundamentals.

If you want to dabble in speculation, it’ probably better to play around with investment simulators – hopefully a few bad trades (that lose you “simulated” money) will teach you a valuable lesson.

 

You Have a “Set it and Forget it Mentality” or Play it too Safe  

Some people have the false notion that investing is a simple process – all you need to do is buy stocks and bonds, let them “sit” for a few decades and *BAM* you’ve just created instant retirement!

Some people on the other hand might know more about investing, but let fear get in the way of building the nest egg that’ll pave the way for a comfortable retirement.

Unfortunately, the result of such laziness or fear is a lot like trying to plant a tree. You can’t just throw some seeds on the ground and expect it to mature properly over a span of 10 to 30 years. Unless you observe it periodically to make sure it’s growing properly, the result of years of negligence might lead to underwhelming growth.

It’s the same with your investment portfolio. If you just dump  a bunch of stocks from hot companies into your portfolio and just leave them there – you have no idea how successful (or unsuccessful) they may be in the long run. And if you play it too safe by putting all your cash into bonds and savings accounts – your portfolio will never produce the earnings to make your retirement dreams possible.

Gaining the expertise to invest wisely through speaking with a financial planner and some self-learning (feel free to browse through our huge collection of investment-related articles) can help you avoid this situation.

By learning the basics of portfolio diversification  and having a better idea of what you should accomplish during the 4 Financial Life Phases, you’ll get the big picture on just how important it is to evaluate your portfolio periodically and adjust your investments so you can reach your retirement goals.

 

What are some other ways that investors can get burned? Share your strategies with us on Facebook! For even more useful information on everything personal finance, visit MoneySmart today!

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.