The 8 Biggest Mistakes When Designing Portfolios and How To Avoid Them
Are you as good an investor as you think? Do you consider yourself a well-informed investor able to anticipate and avoid nearly all pitfalls associated with investing? Chances are, you are making one of the common errors that could cost you hundreds or even thousands of dollars, or worse yet, your financial independence, control and security.“I see people making the same costly mistakes over and over,” says Scott Frush, CERTIFIED FINANCIAL PLANNER and author of Optimal Investing: How To Protect and Grow Your Wealth With Asset Allocation (Marshall Rand Publishing; available by calling 1-800-247-6553). ”But small leaks can sink great ships.”Scott Frush is president of Frush Financial Group and editor of the Journal of Asset Allocation. Discover some of his investment secrets in the free report, 15 Golden Rules for Building Optimal Portfolios, available at www.AssetAllocationExpert.com.Here Scott Frush shares eight common, yet costly, mistakes investors make when designing their investment portfolios and reveals how to avoid them.1. OMITTING APPROPRIATE ASSET CLASSES AND ASSET SUBCLASSES. Numerous landmark studies have concluded that how you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines the majority of your investment performance over time. As a result, make every effort to allocate your portfolio to all appropriate asset classes and asset subclasses.2. SELECTING INAPPROPRIATE ASSET CLASS WEIGHTINGS. By selecting inappropriate asset class weightings a portfolio may earn a lower return and experience greater risk than expected. Consequently, be careful not to over or under weight any asset class, thus enhancing your portfolio’s risk and return trade-off profile.3. UNDERESTIMATING THE IMPACT OF INFLATION. Inflation can erode the real value of your portfolio over time, thus placing your future financial security at risk. As a general rule, the longer your investment time horizon, the more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.4. NEGLECTING THE EFFECTS OF PORTFOLIO MANAGEMENT EXPENSES. Over time, the compounding effect of portfolio management expenses can be quite large, thus depriving you of better returns. For this reason, you should focus on minimizing portfolio management expenses, specifically trading costs, advisory fees and taxes.5. MAKING INACCURATE RETURN FORECASTS. Forecasting is the single most difficult task with designing portfolios. Although not a perfect solution, using historical returns rather than making forecasts is generally considered more appropriate for individual investors.6. OVERESTIMATING THE LEVEL OF PORTFOLIO DIVERSIFICATION. Diversification is one of the ten cornerstone principles of asset allocation and is key to reducing risk, namely company-specific risk. To properly diversify, you should hold sufficient quantities of not-too-similar securities with comparable risk and return trade-off profiles. Consider broad-based index funds for a quick and easy solution.7. MISJUDGING THE IMPACT TAXES HAVE ON NET RETURN. Taxes can have a severe negative impact on your net return. As a result, balance tax and investment considerations, but remember that suitability and appropriateness of an investment take precedence over tax consequences. Never hold an inappropriate investment.8. CONFUSING DIVERSIFICATION WITH ASSET ALLOCATION. Many investors mistakenly believe that a properly diversified portfolio is a properly allocated portfolio. This is the leading misconception of asset allocation. Properly allocate your portfolio among the different asset classes first and then diversify the investments within each asset class.By avoiding these biggest mistakes you will design an optimal portfolio that provides the best opportunity to achieve and protect your financial independence, control and security.
About The Author
Scott Frush, CFA, CFP is president of Bloomfield Hills, Michigan, based Frush Financial Group and is editor and publisher of the Journal of Asset Allocation. To subscribe to the free Journal of Asset Allocation, visit www.AssetAllocationExpert.com.Info@Frush.com
Previous Articles Highlighter:
Are Mortgages A Risky Business (1)
As this was in a country in which the owners of all the boxes were members of a club, the aim of which was to protect the undeserved, but perceived, reputation of said members, the members sent round security vans with sufficient cash to pay out all those who people who “had taken notice of an unfounded rumour.” Things quietened down after a while, and the government decided to introduce legislation to create a minimum liquidity level.Another case we studied was that of one of the world’s largest banks, the board of which was mainly composed of greedy souls.
Writing One Or Two Line Ads (2)
I promise I will not embarrass any one! If I have any suggestions, I will email you personally. Deal? Jane Fulton is Owner & Webmistress of http://janes-place.com 'Home For Newbies & Beginning Marketers'.
Your Administration TeamLook After Them (3)
Keeping them happy so that they will be an important part of your business is another story. As mentioned in prior newsletters, when you look after your people, they will look after you and your business.Lorraine specialises in working with businesspeople showing them how to dramatically boost their productivity, reduce the stress and the mess in their lives and have more time for enjoying their life.www.office-organiser.com.aulorraine@office-organiser.com.au
Smart Choices How To Hire The Best (4)
Create questions that will give you the answers you need. If time management skills are required for instance, you might want to ask, "What is your method for organizing your day?" Compare what each candidate says to determine who is strongest in this area.Close your mouth and open your ears.
After The Sale By Kevin Schappell (5)
Accessorize! It's your car and it should make a statement about you. There are plenty of aftermarket items to make your new car unique like yourself. Wheels, bug guards, window visors and more are all available at part houses like CarParts.comKevin Schappell maintains http://www.carbuyersclub.com where he gives advice on car maintenance, buying, selling, insurance, and financing.
South Beach Diet Effects On Sales (6)
say that this theory is inaccurate and sustain that all beer is “low-carb” being thus suitable for the diet. They have launched ad campaigns urging people to “Have a Beer With Your South Beach Diet”.On the other hand, companies that have as business object poultry, meat and fish trade and those that process dairy products have increased their profit lately:It seems that the US chicken industry has benefited more than the beef or pork industries.
Retreads The Highest And Best Use For A Worn Tire By ARA Content (7)
When you add these savings into the natural resources that are saved and the positive impact this has on the environment, using retreads is a win, win solution for both the transportation industry and the environment," said Martin Bozarth, executive director of the International Tire & Rubber Association.
Bankruptcy Basics (8)
Once you complete payments under the plan, your debts are discharged by the court.Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities.
Drivers Of SUVs Saving Big Money With Diesel Engines By ARA Content (9)
Industry insiders believe that in 20 years, 30 percent of the passenger cars, sport utilities and pickups in America will use diesel engines because of fuel efficiency and near zero emissions capabilities.
The Best Things In Life Are Rarely Things (10)
Keep smilin’You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated - send to: GregReid@AlwaysGood.comAbout The AuthorGregory Scott ReidGregReid@AlwaysGood.comSpeaker and two-time #1 best-selling author,The Millionaire Mentor and Wake Up: Live the Life You Lovewww.AlwaysGood.comGregReid@AlwaysGood.com
Multiple Channels Multiple Times (11)
And, needless to say, their ability to learn varies from time to time.Some people learn best by reading (and you may be one of them since you're reading this article).
How To Change Your Car39s Motor Oil By Stephen Bucaro (12)
Be sure to mark the used oil bottles so you don't accidentally think they are new oil.Copyright(C)2004 Bucaro TecHelp. Permission is granted for the below article to forward, reprint, distribute, use for ezine, newsletter, website, offer as free bonus or part of a product for sale as long as no changes are made and the byline, copyright, and the resource box below is included.
What 8 (13)
Homework: Contact area firms that provide the kind of staffing you need. Compare the cost of those contracts against the cost of keeping these staff on payroll. Be careful: Consultants can get expensive, so be sure to build cost controls (i.e. , fixed fee for a weekly basis or hourly with a “not to exceed” clause) into your contract.
What Is A Secured Loan (14)
Secured loans are suitable for when you are trying to raise a large amount; are having difficulty getting an unsecured loan; or, have a poor credit history. Lenders can be more flexible when it comes to secured loans, making a secured loan possible when you may have been turned down for an unsecured loan.
Where Is Our Largest Technological Plan (15)
TeleCommuter (home work)20. All IT processing and storage through distant data centers 21. An estimated 1,000,000 new companiesand more e-Xs that you can imagine. In every moment that I thought of this plan, I lamented two things: first, to be 73-years old and probably cannot accompanies him in the next 30 years, and second, the dozens of technological ideas that I could suggest.And then the September 11 happened, the main national priority moved to security matters, the investments - government and privates - moved to another directions and the people worried more about the moment than with the future.But in order to survive, without the smallest doubt we need this technological plan in order to maintain the world technological hegemony of the United States in the next 30-40 years and as a result, our world economic hegemony.
Never Get Lost Again - Map Reading Is A Thing Of The Past By Niall Kennedy (16)
You don't have any more with a Magellan RoadMate.I work in the film industry, scouting locations for possible shooting. These can be in built-up urban areas and remote locations all over California.
BOOK REVIEW Performance Of Financial Institutions Efficiency Innovation Regulation By Patrick T Harker And Stavros A Zenios (17)
BOOK REVIEW: Performance of Financial Institutions: Efficiency, Innovation, RegulationIt is rare for a financial text to be written by a Cypriot author yet one of the authors (Stavros A. Zenios) is a Professor at the University of Cyprus.The aim of the book is to examine whether financial intermediaries operate efficiently on a worldwide basis.
Virtual Assistance Higher Productivity (18)
To most, it isn't simply a 9 to 5 job, but a career choice that they take great pride in. Most VA's have local client lists, but are also able to assist 'from afar'.
The Art Of Being Specific Encourages Focus (19)
Before I wrote everything down and began to be more specific, I felt stressed and nervous about starting the Rothline e-commerce site. Once I was able to get the specifics written down I began to feel more relaxed.I know it has been said many times before but it does not hurt to say it again; “the art of being specific encourages focus.” This means that once you can specifically write down you goals in manageable steps you can then be focused on following through on those goals.I start out each day writing down specifically what I need to do that day.
5 Things You Must Do To Fail In Business (20)
It is OK to make mistakes. It is not OK, however, to keep repeating the same mistakes. The biggest difference between successful businesses and failed businesses is that successful businesses will learn from their mistakes and use it for improving.Remember to do the above if you must fail in business.George currently the co-owner of http://www.sweet-reflections.com a successful wedding favors and bridal shower favors business in Carlsbad, California.
Newer Articles Highlighter:
New Energy Bill Reducing Our Dependence On Foreign Oil (1)
Copyright © 2004 AlphaProfit Investments, LLC. All rights reserved.After working for the nation's leading oil and auto companies, Sam Subramanian, PhD, MBA is currently Managing Principal of AlphaProfit Investments™, LLC, an investment research firm based in Houston, TX.
Your Worst Enemy To Successful Investing The Media (2)
Oh sure, each one of them can make a good case for their pick. But so can the next "expert." And usually both of them won't be right (if either of them is).
Networking Tips Getting An 8 (3)
You will of course need to publicize your 800 number in your promotional materials, and advertisements. The best way to get the most out of your 800 number is to have a definitive plan on how you will employ it.
Workplace Fitness A Gym Full Of Useful Advice For Continual Learning (4)
Stick to the task at hand. Action ALWAYS is louder than wordsGet a trainer. We can't see our postures with free weights. We don't know what different exercise might improve a specific problem area.
Business After The Iraqi War (5)
It has trickled down to an annual GDP growth that is expected to reach only 3.1% and both France and Germany have recently downgraded their annual GDP growth forecasts to 2.4% and 2.0% respectively.
18 Tips For Saving Money On Gasoline By Fisher Swanson (6)
Please send a courtesy copy to fisher@thriftyfun.comFisher Swanson is a regular contributer to The ThriftyFun.com News. ThriftyFun publishes information about thrifty living. Send an email to thriftyfunnews-on@thriftyfun.com to subscribe to The ThriftyFun.com News.
Ten Tips To Get Started Writing Your Book (7)
How old are your prospective readers? Male? Female? Are they interested in personal growth, science fiction, mystery, how-to books? What challenges do they face? Are they business people?
Your Organization Is Only As Good As Your People (8)
This is not a contradiction of point number one, above. At every level of responsibility people need to know the boundaries. But everyone also has an inner desire to grow beyond where they currently are.
You Deserve To Retire Early (9)
When you have the choice, you may still continue to work. The big difference is in knowing that you have a choice. Sometimes, we get so busy with our work and lives that we forget the potential within.
The Benefits Of Catalog Sales For Your Business (10)
You can even ask for payment up front on new orders.-----Jim Tilberry is President of Tilberry Direct Marketing. His business specializes in helping inventors and small companies sell their consumer products through mail order catalogs.
4 Customer Service Mistakes Companies Should Avoid Making (11)
The time spent waiting in line, plus the time spent to get my refund, added up to 20 minutes. This company wasted 20 minutes of a customer's time, all in the effort to get information.
What Is An Artist’s Statement How Often Should It Be Updated (12)
You could also include what type of style and technique that motivates you the most while creating your art creation.Some artists have writer’s block when it comes to putting down their thoughts on paper.
Celebrating Successes The Power Of Compliments (13)
He said: You have to be careful, Bill. Ive learned not to compliment my people. Makes them too self-assured, and they get lax in their work habits. Better to keep them guessing.
Timing Is Everything When It Comes To Buying Homes (14)
Low interest rates are the most inspiring reason to buy property. Watch the rate of United States Treasury Bills. According to Sonny Block, well-known talk show hose and real estate author.
5 Tips For Savvy Use Of Your Home Equity Line Of Credit (15)
On a recent $14,000 bathroom remodel, I was able to charge plumbing services, cabinets, and almost everything else to my Fidelity/MBNA 529 College Rewards Mastercard. This card pays you back by putting 2% of everything charged into a 529 college savings plan.
Getting PreApproved For A Home Loan Is One Of The Best Ways To Get A Leg Up On The Competition When Shopping For A Home (16)
Find out if there are any fees involved for pulling your three bureau credit reports, and for the underwriting. Some lenders will charge the fees up front and others will wait until you are approved for the loan.4.
Truth Or Consequences How To Give Employee Feedback (17)
It’s never easy to provide negative feedback regarding someone’s work, but as a leader you can’t avoid it. Be as clear as possible when providing feedback (both positive and negative).
Settling Your Motor Vehicle Accident Claim Yourself By Dan Baldyga (18)
But, here’s the problem: The vast majority of lawyers lack those essential attributes so as to position themselves to correctly process a clients motor vehicle accident claim.QUESTION: “How can Dan Baldyga be so sure about what he’s written regarding the above?” ANSWER: “Because Dan was an Insurance Claims Adjuster, Supervisor, Manager and Trial Assistant.
Steps To Buying A Used Car With Confidence By ARA Content (19)
(ARA) - Industry statistics show that almost three times as many people buy used cars as buy new. To help consumers make informed decisions in the process, the experts at CarMax, America's leading used car retailer, have put together a basic list of the things to check when buying a used car.
Can It Be Is There Advertising People Actually Love (20)
The type of advertising I'm referring to is promotional items, also known as advertising specialties. It's anything a company would put their logo and contact information on, and then give away.
Permalink to The 8 Biggest Mistakes When Designing Portfolios and How To Avoid Them