Many of us are making really stupid mistakes in our investing that could be easily corrected. In order to achieve profits, keep them and attain better long term wealth we need to cut costs on things we really don’t need to be investing in or products and services that the investing world throws at us. Use these five tips and ask yourself whether or not they are damaging your overall returns because of unnecessary costs and fees.
Get rid of your Mutual Funds
Many investors swear by mutual funds and the outlandish claims that mutual fund managers make about where their funds are going. Even worse are the claims they make about the historical return of the fund in comparison to the S&P500 or whatever other index looks best against their poor returns.
The reality is most investors do not have enough money put in the fund for the fees to make it worth it to them. Furthermore they spend time chasing funds that are wild or high risk with stories of high returns. These funds which trade frequently waste investors dollars instead of working for them.
These are also one of the easiest investments to be involved in a scam or ponzi scheme.
Stop High Frequency Trading
The only way you are going to be able to make high frequency trading work in your favor is if you are fortunate to have enough capital to potential lose, putting it on the line and taking several high risk positions.
Similarly you put yourself in an unfortunate position to have to watch the market constantly. Although most of us keep an eye on it from opening to close we do maintain a life beyond it as casual investors. However, unless you are a professional and it is your job, keeping your eyes on the market every minute will cause you immense stress and sleepless nights.
Also, keep in mind that your broker is there to make money off of your trades so if they are recommending movements or buy and sell orders it is because any order gets them paid regardless of whether or not you make money.
Give ETFs a Chance
You may not subscribe to Random Walk Theory but ETFs work and they tend to mimic their respective, index, market or sector and in many cases beat the majority of high frequency traders.
ETFs get such a bad rap because they are truly boring. They are not nearly as volitol as individual securities and do not represent a tangible interest such as a individual company for you to get interested in and passionate enough to follow. They do a great job of killing that emotional investing!
The secret to taking advantage of ETFs is to find those that trade commission free from your broker. Many brokers are adding this service to get investors interested in trading with them hoping they’ll sign up for other investments and products. You’re smarter than that. Invest in the commission free ETFs.
Low or No Cost Direct Stock Purchase Plans
Either no one knows about direct stock purchase plans or no one wants to bother investigating which ones are affordable or either completely free.
Did you know you could invest in General Electric or Eaton Corp for free? Whatever money you put in them only goes towards buying shares or fractional shares of stock. There are a small list of these available from various transfer agents. Take advantage of them and don’t lose any of your money investing.
Dollar cost averaging for young people on direct stock purchase plans are a great way for new investors to cut their costs and learn to accumulate a diversified portfolio of great stocks.
Stop Wasting All Day on Penny Stocks Newsletters
I have been in this situation in the past and I know a lot of readers and fellow bloggers get involved in this trap but it is just not worth it for 99.9% of us. Spending all day in front of the computer screen, sometimes several watching penny stocks and their corresponding rumors is a fools game.
Lots of people swear by penny stock picking newsletters and I have even recommended some for their research benefits along with their dirt cheap price. However to rely on these or any others to make all of your trading decisions is set up. These guys who write and fund these newsletter know exactly what their readers will do and take advantage of it.
Yeah, they might throw you a bone every once and a while so that you have some confidence in the ability of the newsletter to outperform but after that they will take the money and run. There is no accountability and they have little incentive to play fair. Why should you even play then?