Chapter 22. Ten Common Fund-Investing Mistakes and How to Avoid Them

In This Chapter

  • Designing the right plan for you

  • Keeping taxes and fund fees in mind

  • Staying away from shady advisers and market predictors

From getting your finances in order to selecting funds to maintaining your portfolio over time, various potholes and dangers can get in your way. This chapter highlights the ten most common fund-investing mistakes you're likely to make and how you can sidestep them.

Lacking an Overall Plan

Just as you shouldn't build a house without an overall plan, you shouldn't start buying funds until you have your arms and mind wrapped around a sound financial plan. The plan doesn't have to be a fancy, professionally or computer-generated one, but it should include the basics:

  • Proper insurance coverage, like health, disability, auto, home, excess liability if you hold sufficient assets, and life insurance if others depend on your income

  • A plan for paying off consumer debt on credit cards and auto loans, if you have any

  • Savings goals for retirement, buying a home, starting a business, putting your kids through college, and anything else your heart desires

  • An overall asset allocation — what portion of your money should be invested in different assets, such as stocks (foreign versus domestic), bonds, and so on

Failing to Examine Sales Charges and Expenses

Would you ever buy a car without considering its sticker price? How about checking out the car's safety record and insurance costs? Mutual funds are ...

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