While there are certain truths that will always apply in the investing world, some strategies can become outdated. If you’re doing the same things you were doing 20 years ago in the stock market today, there’s a good chance that you’re going to be losing money. Here are a few old school investing methods that you should probably look at dropping.
The old myth of the balanced portfolio doesn’t usually result in lower risk or better returns. Many investment advisors will recommend putting your money into 60 percent stocks and 40 percent bonds. Typically, this simply results in you creating a portfolio that moves right in line with the stock market anyway. This is especially true when bonds are paying next to nothing in interest. Don’t fall into the trap of putting your money into balanced mutual funds either. They seldom provide very good returns on your investment.
Following Expert Picks
Another popular strategy for investors is to find a columnist that they like and then invest in all of the stocks that they tell you are going to increase in value. Most of the time, these guys don’t really know what they’re talking about and they are usually wrong. If you make a habit of doing whatever the analysts tell you, you’ll probably not have a very strong portfolio. Most of them are simply in the business of getting people to invest in general, not necessarily picking winners. The experts at Fisher Investments office address this issue for most of their customers, and tell them to be very careful who they trust.
Buy and Hold
While there are times that a buy and hold strategy can still work, it is not the bastion of wealth creation that it once was. If you were using this type of strategy during the financial crisis of 2008, your portfolio probably took a bath. With so much economic uncertainty, it’s really hard to just pick a company and hold onto it for the long-term. The market changes so fast that a powerhouse company could be on the verge of going out of business in a short period of time. It’s up to you to be able to figure out which companies are going to stick around for the long haul and which ones won’t be.
Be sure to learn investment strategies that have been updated to reflect today’s market. There is still money to be made, it’s just a little bit more complex than it used to be.