Bad financial investments are part of investing money and achieving financial goals – and so is bouncing back from bad investments! These investment tips are from financial planner Laura Mattia, who describes when you should sell a bad investment and how to overcome a financial decision you regret.
“Since making my own bad investment decision, I have decided that no one, regardless of their knowledge or experience should manage their own money,” says Mattia. “Our natural instincts and psychological predispositions towards money create obstacles.”
If you’re curious about Mattia’s bad financial investment, ask about it in the comments section below – she’ll spill the beans!
If you made a bad financial investment, consider hiring a financial planner. “It’s difficult to have the self discipline to stick with a proven strategy which will result in significantly higher wealth in the long run,” says Mattia. “It’s better to shop around for a financial planner you trust to provide you with the discipline and structure required to achieve your financial goals.”
For more info, read Tips for Choosing a Financial Planner.
Types of Bad Financial Investments
1. Emotional investments in mutual funds or stocks and bonds. The number one sign that you’re in a bad investment is if you made the investment because of an emotional response. Emotion-based decisions nearly always result in very bad investment results.
2. Volatile financial investments. Investments that demonstrate significant volatility – beyond what’s expected in its asset class – are usually too risky relative to expected return. This is especially an issue when there isn’t a good, solid explanation for the volatility.
3. Confusing or unknown financial investments. If you have no idea what the investment is, what it should do for you and why you are invested in it, then it may be a dangerous or bad investment. Even if you have a financial advisor, he/she should be able to explain why the investments were selected to your satisfaction. Ignorance is not bliss and can only lead to bad investment results.
To overcome a bad financial investment, remember that “today is the first day of the rest of your life”! Based upon what you know now, would you buy this investment today? Will it help you reach your financial goals? If it’s not a good investment – if you wouldn’t buy it again – then why hold on to it? Sell it and put your money into a better investment that will bring you closer to your goals.
How to Bounce Back From a Bad Financial Investment
Heed the old adage, “Buy low, sell high.” The best time to make an investment is when nobody else wants it. The best time to sell an investment is when everyone wants it! Studies show that the average investor does the exact opposite over and over again. That is because buying when a particular market has taken a beating is an extremely difficult thing to do, psychologically.
When you make a bad investment, you need to take control of your finances.
Remember that investing in the stock market is for long term financial investments only. Don’t put money in equity that you’ll need in the next ten years. It’s okay to have a portion of your portfolio in equity, but there should be enough other asset classes that generate income – so you don’t have to sell equity at the wrong time.
For more investment tips, read 5 Tips For Picking and Investing in Stocks for Smart Investors.
If you have any thoughts about these investment tips, please comment below…
Laura Mattia, MBA, is a Wealth Management Principal with the Baron Financial Group, and has provided financial leadership for over 20 years.