There is a lesson to be learned from the $2 billion-plus loss by a sophisticated trading unit of JPMorgan Chase. Even “expert” traders make mistakes.
You shouldn’t expect every investment decision you make to be perfect. And when you are wrong, it’s best to recognize it and change course. It also helps to understand how you are different from a major trader. JPMorgan Chase may recover from speculation gone wrong. You might not be able to.
When individual investors falter, it is often one or more of the following common mistakes:
Failure to establish a long-term plan – Whether or not you make your own investment decisions, this part is up to you.
Not starting early enough – Some people put off starting a serious investment program until their 50s.
Buying and selling at the wrong times – Most individual portfolios underperform the common indexes generally because of poor timing.
Insufficient diversifying, and not rebalancing regularly – Maintain a diversified portfolio at all times, and rebalance once a year.
Being too conservative – Avoiding any and all risk is generally not a sound strategy in the long term.
You may have been making any combination of these mistakes in your portfolio for years. Don’t let that discourage you. Simply identify mistakes and correct them.