Feb
09
The Psychology of Investing: How We Cope With Risk
Researchers have found that investors have a tendency to psychologically exaggerate declines in the performance of an investment and to minimize gains. It's a phenomenon with a complex sounding name -- "myopic loss aversion" -- but also one that makes a simple point: Psychology plays a role in our investment decisions. Understanding that role, the subject of this second installment of a three-part series on investment risk, may help you stay on course toward your long-term financial objectives. Word Play Individuals subconsciously "frame" expectations based upon how the information is presented to them. For instance, would you prefer to invest in a security that has a 40% chance of yielding negative returns or one that has a 60% chance...
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Aug
19
Ten Sure Ways to Lose Money in Stocks
Tags: stocks
Are you looking to wipe out your savings? Here are 10 proven ways to manage your stock portfolio into the ground in no time. Who needs a pyramid scheme or crooked money manager when you can lose money in the stock market all by yourself -- quickly and easily -- by following these 10 simple strategies: Go with the herd If everyone else is buying it, it must be good, right? Wrong. Investors tend to do what everyone else is doing and are overly optimistic when the market goes up and overly pessimistic when the market goes down. For instance, in 2008, the largest monthly outflow of U.S. domestic equity funds occurred after the market had fallen over 25% from its peak. And in 2011, the only time net inflows were recorded was before the...
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Mar
28
Your Choices, Your Goals -- Make the Right Match
With thousands of stocks, bonds, and mutual funds to choose from, even the most seasoned investor can find building a portfolio overwhelming. And recent market volatility can make developing -- and sticking to -- an investment strategy challenging. By matching your investments to your goals, assembling the appropriate mix may be easier than you think. Asset Allocation Is Key Since each investment carries a certain degree of risk, taking the time to plan out your choices can pay off in the long term. The blueprint will be your asset allocation -- the way you spread your money among stock, bond, and cash investments. It can help you manage risk and return in your portfolio. The most effective asset allocation is one based on your...
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