Investor Education | Avoid these seven financial sins

Although you may try to live your life the best way you can, you still may be guilty of some common “financial sins.” This has nothing to do with wrath, greed, sloth, pride, lust, envy or gluttony. However, the actions you take regarding your financial affairs may lead you astray, especially as they relate to investments. Practical advice: Don’t fall prey to these inclinations. By avoiding the following seven financial sins, you are more likely to end up in a blissful situation.

Sin #1: You invest based on your emotions. Do not let your emotions dictate financial strategies. For instance, when the stock market is booming, greed can lead you to make bad decisions. On the flip side, if you are faced with a declining market, you cannot let fear overtake your financial sensibilities. Try to maintain an even keel.

Sin #2: You are overly optimistic about returns. Back in the 1990s, investors took it for granted that they would generate annual returns averaging 10% or even higher. But that is no longer a realistic outlook. If you lower your expectations slightly, you can better position yourself for what might happen.

Sin #3: You pay excessive fees. Of course, you usually “get what you pay for,” but that does not mean you should pay exorbitant fees in connection with investments. Rely on trusted financial advisers to steer you in the right direction.

Sin#4: You are not adequately insured. Insurance is a key component of most financial plans. This includes various types such as life insurance, health insurance and disability income insurance. Try to have your needs quantified based on your current and future objectives.

Sin #5: Your risk exposure is too high. It has often been said that there is an inherent risk in the investment markets. Recognize that it is possible to make money, lose money or stay in the same basic position. Do not risk more than you can reasonably afford to lose. Consider your “risk tolerance” as part of your investment decisions.

Sin #6: You do not keep an emergency fund. It is generally recommended that you keep enough financial “cushion” to sustain your family through six to 12 months if financial disaster should strike. Consider an emergency fund that will last even longer if you are contemplating retirement or are already retired.

Sin #7: You do not obtain professional assistance. This is not to say that you are not qualified to manage your financial affairs, but almost everyone needs a little help now and then. As mentioned above, you should not pay excessive fees, but that does not mean you should avoid guidance when the situation calls for it. Do not let your pride get in the way — or you could be guilty of the “deadliest financial sin of all.

This newsletter/advertisement is produced for our clients, friends and associates through an arrangement with WPI Communications, Inc. for the representatives’ use. Although the editorial content is professionally researched, written and edited, neither our firm nor any of its agents, representatives or associates make any representations regarding the accuracy of the content or its applicability to your situation. The information in this communication is not intended as tax or legal advice. In accordance with IRS Circular 230, the information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Any tax advice contained in the body of this material was not intended or written to be used, and cannot be used, by the recipient for the purpose of 1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or 2) promoting, marketing or recommending to another party any transaction or matter addressed herein. You are encouraged to seek tax or legal advice from an independent advisor.

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