Financial planner Taylor Schulte says that taking an overly active approach to your investment and financial plan is one of the biggest mistakes any investor can make.
When it comes to building long-term wealth, your best bet is coming up with a sound financial plan and sticking to it.
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Learning more about personal finance and investing is a smart move if you aim to grow wealth, but one financial planner says learning and acting on that knowledge are two separate issues.
Taking an overly active approach to your investment and financial plan is one of the biggest mistakes anyone can make when it comes to their finances, says San Diego financial planner Taylor Schulte.
If you’re curious what being overactive might look like, imagine someone who is jumping in and out of investments on a regular basis — usually on a whim or because of something they saw or read.
“For example, maybe the bond fund you picked hasn’t been doing very well lately, so you decide to swap it for a new one, thinking that making a change is going to improve future results,” says Schulte. “Or, a stock you own has had some negative press, so you let that news influence you to sell it and buy something more exciting.”
This mistake is also prevalent outside the world of stocks and bonds. For example, maybe you change financial planners or brokerage firms at the drop of the hat or each time you see, read, or hear something that works contrary to your current belief.
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The problem with too much action is the fact there are often financial consequences for making too many financial moves. Leaving your money alone gives it time to rebound from dips and valleys over the long term, while moving it every time it falters doesn’t guarantee it will do any better, and doesn’t give your initial plan a chance to work out. If you’ve put together a sound investment and financial plan, doing less and making fewer changes typically results in a better outcome, says Schulte.
Why do we act the way we do? We are wired to behave this way because doing more is the solution for just about everything else in …read more
Source:: Business Insider