Reuters ~ Four investing mistakes to avoid in 2012

by lexie Sat Dec 10, 2011 7:42 am

Dec 9, 2011 1:03pm EST

Four investing mistakes to avoid in 2012

(Reuters) - The ongoing turmoil in world markets has made for a herky-jerky ride this year. What did you learn?

While most professional money managers expect stomach-churning volatility to continue, there's no reason why you can't still position your portfolio for safety, income or growth. Here are some mistakes to avoid:

1. Staying Out of the Market.

Sure, the market this year was crazier than selling snowballs to Inuits. But by staying out - and pretending you knew when to come back in - you missed plenty of profit opportunities. The Select Sector Utilities SPDR ETF , for example, offers a nearly 4 percent yield and has returned about 16 percent year to date through December 7.

The FTSE NAREIT Residential Index ETF, which samples real estate securities throughout the U.S., is up about 9 percent year to date with a 3 percent yield. The greater lesson is not that these funds did well - I'm not predicting they will do well in 2012 - but that diversification offers returns in a number of places. The "all in or all out" approach will deprive you of profits and you just can't know where they will come from.

2. Ignoring Inflation.

While the current U.S. Consumer Price Index is running at slightly more than a 3 percent annual rate of increase, inflation has never really gone away. Just look at your medical expenses. Annual premiums for employer-provided health care plans rose 9 percent this year, according to the Kaiser Family Foundation. That's three times the rate of general consumer inflation and more than four times the rate of wage increases. With inflation, everything is relative. If your essential expenses are outpacing your wage growth, you're falling behind.

While there's little you can do to get a raise in a sour economy, you can protect your portfolio with Treasury Inflation-Protected Securities or I bonds, both of which pay a premium based on the government's cost-of-living index increase.

3. Not Having an Investment Policy Statement.

If you are constantly watching the headlines and business TV shows, you're not paying attention to your real bottom line. An investment policy statement puts in writing your goals, risk tolerance and portfolio allocation. Do you want to retire at 60? Are you saving for college? Are you living on a fixed income? Each kind of objective requires a different allocation. And I'm not just talking about just stocks and bonds. There's a whole range of alternative investments from public real estate investment trusts to commodity funds that can enhance your returns. So if you haven't crafted a personalized investment policy statement, now's the time to do it. Here's some guidance: link.reuters.com/dah55s.

4. Trying to Time the Market.

Did you get out of gold when it turned south earlier this year? How about European stocks and bonds? It's much more sensible to determine how much of your portfolio should be in different asset classes based on your age, vocation and risk tolerance (see investment policy statement above). If you need to preserve capital, maybe you need to build a portfolio of individual bonds and hold them to maturity. Searching for income? Create a portfolio of dividend-paying stocks and buy on a monthly basis while reinvesting your dividend payments in new shares.

Will next year bring more bad news from Washington and Europe? What about China and the developing world?

You can count on market hiccups. Volatility is now the rule rather than the exception. Yet any strategy that's predicated on actively dodging bullets is doomed to fail because you're competing with light-speed robo-traders. It's more important to have a working knowledge of market and credit risk to understand how much money you can lose.

Make your mission to hedge risk in the coming year. How do you offset bond market risk? Do you have a way of protecting your stock positions? Are you overconcentrated in U.S. or European stocks? Now's the time to face the truth and make adjustments.
---

The author is a Reuters columnist. The opinions expressed are his own.

(Editing by Jilian Mincer and Beth Gladstone)

http://www.reuters.com/article/2011/12/09/us-usa-investing-mistakes-idUSTRE7B81LQ20111209

by lexie Sat Dec 10, 2011 10:16 pm

This is the Reuters article that made it to Dinar Recaps today!! Whooo hoooooo :yes:

by Guest Sat Dec 10, 2011 11:23 pm

This is really good info, sure glad I stayed away from the stocks!

by freebird Wed Dec 14, 2011 4:51 pm

Dear Fellow Dinarian,

I know you will be interested in looking for opportunities for investment after the RV.
I don't know if you would be interested in this, but I thought I would mention it to you because it could be a real "sleeper" in making a lot more money with very little investment.

A group of us is considering investing in a large cat ranch near Hermosillo, Mexico. It is our intention to start rather small with about one million cats. Each cat averages about twelve kittens each year; skins can be sold for about twenty cents for the white ones and up to forty cents for the black. This will give us twelve million cat skins per year to sell at an average price of around thirty-two cents, making revenue about $3 million a year. This averages out to about ten thousand ($10,000 USD) a day excluding Sundays and holidays.

A good Mexican cat man can skin about fifty cats per day at a wage of $3.15 a day. It will take only 633 men to operate the ranch, so the net profit would be over $8,200 per day.

Now, the cats would be fed on rats exclusively. Rats multiply four times faster than cats. We would start a rat ranch adjacent to our cat ranch. If we started with a million rats, we will have four rats per cat per day. The rats will be fed on the carcasses of the cats we skin. This will give each rat a quarter of cat per day. You can see by this that the business is a clean operation, self-supporting, and really automatic throughout. The cats will eat the rats, and the rats will eat the cats, and we will get the skins.

Let me know if you are interested. As you can imagine, I'm rather particular with whom I want in this deal. And I want the fewest investors possible.

May I hear from you at your earliest convenience?

Very truly yours,
freebird

(Please do not take this seriously!)

lol!

by **Kevind53** Wed Dec 14, 2011 6:45 pm

Good info, the sad reality of the markets is almost no one get's in OR out at the right time ... in fact the opposite is most often true.

Reuters ~ Four investing mistakes to avoid in 2012

Reuters ~ Four investing mistakes to avoid in 2012

Re: Reuters ~ Four investing mistakes to avoid in 2012

Re: Reuters ~ Four investing mistakes to avoid in 2012

Re: Reuters ~ Four investing mistakes to avoid in 2012

Re: Reuters ~ Four investing mistakes to avoid in 2012