Posted by: Janet Schlarbaum

Author: Barbara Kimmel

1. Lacking an investment plan a/k/a/ “Don’t take a trip without packing the map”. A pre-planned asset allocation generates positive results and eliminates emotional panic selling.

2. Buying cheap stocks a/k/a “Road crews erect “Dead End” signs for a reason”. Most stocks with low share prices also arrive at the bottom for a reason. There must be institutional interest to influence price, and many won’t even glance at stocks below $8 or $10.

3. Purchasing story stocks a/k/a “A good fable lulls a child to sleep”. Don’t get taken by compelling “story” stocks. The plots include a cure for cancer, a big oil strike or a revolutionary invention. Such promising stories rarely prove true. If the “story” materializes, the company will still be a buy.

4. Selling your winners a/k/a “You gotta know when to hold ‘em’”. Don’t sell your winners. These companies combine outstanding management, product and cash flow, creating steady growth for years. Holding these companies for the long run will compensate for other investing mistakes. In fact, one or two big winners can create real wealth.

5. Holding onto a peaked stock a/k/a “Trees don’t reach to the heavens, and companies don’t continue growth beyond reason”. Top companies peak for reasons such as attrition of top management or competition. Systematic pruning will help you avoid a rotting, unhealthy investment.

6. Under diversification a/k/a “Ideas are good, but a mind full of them is better”. Resist the urge to rely on a few stocks that you know. Lack of portfolio diversification leads to erratic and volatile returns, and owning several companies in the same industry also isn’t diversification. The best investment results happen by investing in leading companies across various industries.

7. Over diversification a/k/a “A portfolio stretched like an old T-shirt won’t help an investor benefit from their insight”. You don’t create diversification by spreading yourself too thin. Although a mind full of ideas is good, ideas acted upon on a whim waste good thoughts.

8. Over trading a/k/a “Replanting a garden every week won’t produce high-quality tomatoes”. Don’t follow market “noise” and bounce from sector to sector or theme to theme. This prevents investors from enjoying the rewards of a long-term winner. Give stocks enough time to mature and compound.

9. Too much margin a/k/a “Living on borrowed time brings a rush of excitement, but it’s a quick trip when time expires”. Don’t underestimate the damage margin can create. The relatively low cost and ease of obtaining leverage takes investors down a dangerous path. When a portfolio on margin declines rapidly, it can catch even experienced investors off guard.

10. Too many options a/k/a “In life there’s always options, (but timing makes the difference”). When you buy options, you must be right and use impeccable timing. Options allow an investor to use leverage and control more shares but there are relatively high spreads involved in trading them. Many times investors lose money on their transaction even after they followed correct assumptions.

Posted by: Janet Schlarbaum

Author: H Craig Rappaport

Surprisingly few new retirees or pre-retirees have a plan for the allocation of their portfolio assets. However, if your portfolio is to be a source of financial security during your retirement years, then it must be carefully tended, like a garden, so that it continues to grow. Apart from the obvious benefit of additional resources during your retirement years, there are a number of factors that reinforce the necessity for continued portfolio growth.

* Inflation erodes assets, which could make it necessary for you to lower your standard of living, not a happy thought.

* You might be forced to make withdrawals at a percentage rate that is higher than your portfolio is actually earning. This substantially shortens the life of your portfolio. Remember, your goal is to make your assets last as long as you do, or longer.

* With medical science now making it possible for us to live longer, maintaining steady growth in your portfolio’s assets takes on a completely new level of importance.

* Finally, a weakened portfolio necessarily limits what you can pass onto your heirs.

In the event that your retirement income alone will not cover your post retirement expenses, ideally the earnings from your portfolio will make up the difference. Even if you are one of those who have saved enough so that you will not have to work after you retire, your portfolio will require regular attention if it is to help support the lifestyle you wish to enjoy during retirement.

Asset allocation is part of the general retirement planning process, the goal of which is to determine the optimal allocation prior to the selection of individual assets or classes of assets. Put a different way, asset allocation establishes your portfolio policy. Your funds are invested in various types of assets thus allowing you to achieve your financial goals and take advantage of risk reduction through optimal portfolio diversification.

The three basic types of asset classes are stocks, bonds and cash. The percentage of each asset class in your portfolio depends on a number of variables, including but not limited to your financial goals, current savings and investment plan, time horizon and risk tolerance. Bear in mind that over 90 percent of the performance of your portfolio is predicated on how the assets are allocated.

To reduce risk (and maximize return), select asset classes that compliment each other. Bearing in mind, once again, that you are likely to live twenty-five to thirty years into retirement., keep at least a portion of your assets in equities for the long term.

New retirees (or those retiring soon) are often tempted to switch their portfolios into a very conservative mix. Although such a mix may protect your portfolio from a decline, it also limits growth potential. If during your working years you maintained a balanced combination of stocks, bonds, and short-term investments, and if you have made periodic adjustments as needed to maintain the right mix of growth, income, and stability, you may not need to make changes in your portfolio when you retire.