“Ten Funds You Absolutely Must Own Right Now” could be the cover of a major publication you might read. Every year, several financial magazines designate a handful of investments that they exhort the reader to buy immediately.
As hype builds, it’s easy to get caught up in the excitement, imagining coffers overflowing with cash. However, chasing the latest investment trends may just as easily leave an investor with a big loss.
A Lack of Discipline
Sometimes an investor’s biggest obstacle may not be taxes or inflation, but rather his or her own behavior. Undisciplined investor behavior accounts for a high percentage of missed opportunities. One study found that, in general, investors pour money into mutual funds when the market is up and tend to sell when the market declines. In fact, during down markets, investors make wrong decisions 75% of the time.1 Additionally, investors often end up buying “hot” funds at their peak, showing up just in time to see the funds head south.
Rather than obsessing over market fluctuations, investors who maintain a buy–and–hold strategy may avoid some financial pitfalls. A long-term perspective can help you ride out the market’s characteristic ups and downs. Working with a financial professional who focuses on your overall financial objectives can also help you consider options that could have a substantial effect on your long–term financial situation. However, there is no guarantee that working with a financial advisor will improve investment results.
No Crystal Balls
The ubiquitous financial disclaimer, “past performance is no guarantee of future results,” is one to keep in mind when reviewing the stellar performance of a fund touted in a magazine or advertisement. Any investment can be affected by market conditions that are impossible to predict.
Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Maintaining a diversified portfolio and investing for the long haul are important strategies that may lead to financial success. Unfortunately, many investors chasing “hot” funds may find themselves left out in the cold.
