We found some interesting results of a study conducted by members of the Chartered Financial Analysts Association. These are the folks who make investment decisions for large investors such as banks and mutual funds.

 The CFAs listed the most common mistakes that individual investors habitually make. Let’s resolve not to make them any longer.

• Buying investments without first establishing an investment strategy.  This is determined by your time horizon, risk tolerance, and available funds.

• Buying individual stocks instead of a diversified portfolio.  This subjects you to greater risk.
• Buying stocks instead of companies.  Some analysis is always better than none.
• Buying high.  This is performance chasing and seldom works.
• Selling low.  Smart investors are willing to cut losses, instead of holding on.
• Churning investments.  Transaction costs can reduce investment returns significantly.
• Acting on tips and sound bites.  Most likely, if you have heard news, so has everyone else.
• Paying too much in fees and commissions.  Investors are often unaware of the level of expense.
• Having unrealistic expectations.  The S & P 500 has generated an average annual return of 10.7% a year and 4.7% after taxes and inflation.  Don’t assume that you can realize double digit returns year in and year out.
• Being neglectful.  People often abandon plans in the face of investment losses, instead of sticking to a long term plan.
• Not understanding risk tolerance.  All investments have some level of risk.  Understand your own and invest accordingly.

If more than one of the above describes you, then you should be working with a financial advisor.