Five investment mistakes even smart people make

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Learning about common investment mistakes can help you know what to watch out for. Don’t fall prey to:

1. Trying to time the market.

A 2016 report from financial research firm DALBAR, Inc., found that individuals who buy and sell stocks on their own often generate lower returns than if they had just purchased and held a Standard & Poor’s 500 Index Fund. Dalbar attributes this to investors inadvertently selling low and buying high as they try to predict future market behavior rather than riding out the ups and downs for a longer term.1

2. Making emotional decisions.

Financial markets can soar one day and drop the next. If this see-saw makes you nervous enough to change investment choices often, you could end up managing your money too conservatively. On the other hand, buying a stock hastily for fear of “missing out” without researching it thoroughly could cost you. Do your homework before reacting to market changes.

3. Ignoring tax consequences.

Taxes can take a big bite out of your investments—both now and during retirement. Know your tax bracket and how taxes may affect your total return now and later. If you have many years until you need your money, consider ensuring that high dividend-paying stocks, bonds, and assets that generate significant capital gains are held in retirement accounts that can shelter gains from current taxation.
In accounts where your earnings will be taxed, such as a brokerage account, consider investments that may result in lower tax liability. Talk to your advisor about tax-efficient investments.
A tax advisor can help you craft a distribution plan that outlines the most tax-efficient ways to withdraw your retirement savings.

4. Holding losers too long.

Mistakes happen. How you recover is what counts. Consider avoiding holding onto a losing investment, even if it has to be sold at a loss. A better strategy might be to decide in advance at what point you’ll throw in the towel if it’s underperforming.

5. Not getting help if you need it.

Managing your financial future is complex. Find an advisor you feel comfortable with so you can ask your questions and make informed decisions.
Financial advice may be available through your workplace plan. A TIAA advisor can help guide you in making informed decisions so you can avoid these common mistakes.
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This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.

1Dalbar Annual Quantitative Analysis of Investor Behavior, 2016