One of the biggest mistakes the average investor makes is choosing investments for the wrong reasons, such as apparent popularity or “buzz”. Investment decisions should be made without emotion, pressure, or guilt. Actually, it is extremely difficult for the average American to choose appropriate investments without being affected by outside influences and emotions. For this reason, it is best to retain the services of a qualified investment advisor or financial planner who will be able to assist from an independent perspective.
When people attempt to choose their own investments they are subjecting their money to even greater risks than just an inappropriate portfolio. The average consumer does not have the time to adequately evaluate a potential investment, nor the resources to even begin an analysis, nor the education and experience to fully comprehend all the data. Additionally, most consumers do not have one of the most essential components to successful investing (besides a qualified professional) patience.
This is the reason that many people end up selecting investments that they heard about from a co-worker, or on one of the thousands of “stock picking” websites. Again, the problem with this is that the co-worker or neighbor is in the same situation and is not a professional investment advisor, nor are the people publishing “reports” on stock picking websites.
Legitimately validating an opinion of an investment, or comparing it to other available similar choices, is a task that can only be adequately and correctly completed by an industry professional. Licensed investment advisors and financial planners will not fall victim to “buzz”, nor will they be affected by emotion when recommending a portfolio.
Investing in anything merely because “everyone else is doing it” is perhaps the worst reason. If it seems as if “everyone” is putting their money into one particular investment vehicle, ask your investment advisor to get you this type of information. Most of the time it’s just artificial hype surrounding an investment, and it is fueled by rumors and misinformation.