10 Big Mistakes in Investing

#1: Buying tax-favored investments (e.g. municiple bonds, series EE bonds) inside tax-advantaged vehicles (i.e. IRAs, Keoghs)

#2: Faliling to maintain a sufficient contigency fund.

#3: Jumping on the bandwagon. The investment that all your friends are excited about may not be right for you.

#4: Misunderstanding the meaning of "High Yield" - usually it applies to a junk bond or a mutual fund investing in lower quality bonds.

#5: Refusing to let go. - some securities will never "come back". Even if they do, the rate of the return you receive in the meantime may not rival what you would have gotten on an alternative investment.

#6: Focusing only on return - there's no such thing as a free lunch.

#7: Having too many eggs in one basket - it is important to diversify among different investment types (stocks, bonds, cash, international stocks, gold) as well as within those asset classes.

#8: Failing to implement your strategy in hard times - if you investment strategy calls for investing a stock fund every month, do it even if you believe the stock market may decline next month.

#9: Timing the market - It doesn't work - the opportunity cost of investing in cash investments tends to exceed market losses over time.

#10: Paying income tax on someone else's capital gain - Most mutual funds charge their shareholders on a paricular date in December, passing along their proporationate share of all the capital gains that the funds have realized from selling assets all year. The result: You gain immediate taxable income without increasing your shares value. To avoid this problem, find out when the fund posts its gains for the year; then buy your shares after that date.