As an advisor who's done the rounds for over 20 years, here are a few things to watch out for:

1. Over-diversification - yes, there is such a thing, and it can really hurt you.  If you're so well diversified that none of your investment positions have any umph you're not going to make any money in either the short or the long-run.  Diversification is a tool for spreading the risk in anyone investment over many.  I personally find it really frustrating when I sit down with clients and find that the largest stock holding in their mutual funds is less than 1% of a stock.  So if this stock went up or went down, would it matter?  of course not.

2. Overlapping investments in mutual funds - A lot of times clients own the same stocks in different mutual funds, so when they think they are diversified, in reality they are not.  I don't think you need to own too many mutual funds in one portfolio.  The only reason you should add a fund is if you are trying to emphasize a particular sector of the economy or a particular geography of the world, or companies in particular growth cycles.  Your advisor should be able to tell you the reason for each mutual fund position.

3. Basing mutual fund choices on MERs - Many investors and advisors shy away from mutual funds that carry high MERs. They see this as reducing the direct return to the client.  My view on this is a bit different.  I don't believe in completely ignoring MERs however, pay attention to what the MER applies to.  It is the cost of running the mutual fund, and in most cases staff salaries constitute almost 60% of the cost.  Seriously, would you want the people who command the lowest salaries in the financial industry to manage your money for you?  How good do you think they are at what they do?  And if they are good people with good reps, how much of their time is being spent on managing the mutual fund if the fees they charge to the mutual fund is well below the market value of their time.  Would you pick the cheapest heart surgeon to perform your heart transplant?

4. Rebalancing - this is a process by which you mindlessly sell investments that are making money and buy the one that are under-performing.  Typically, rebalancing is conducted in a closed universe, which means that there are a finite number of investment choices included in the exercise.  I don't think that rebalancing ought to be conducted at regular intervals with complete disregard to what is happening in the markets.  Moreover, I don't believe in rebalancing using a finite universe of investments.  I believe that investment choices should be continuously added and/or truncated as times dictate.

5. Investing in Balanced funds - By definition a balanced fund incorporates equal parts of fixed income and equity.  Typically, when equities or stocks move up, bonds or fixed income securities move down: they are inversely related.  This means that the return on a balanced fund would theoretically be a flat line.  And it mostly is.  I am sure that there are advisors out there who can make a case for these investments, I'm just not one of them.

6. Investing for yield rather than total return - in terminology, yield and return are two very different things.  Sadly, most advisors do not make the distinction between the two - and without this clarification most clients use the terms interchangeably.  Total return over a defined period of time includes income and capital gains, where as yield is current income in ratio to current price.  At different stages in the life of an investor they are investing for growth while building their investments and on income when they are drawing on their investments.  I find that financial lingo helps to confuse the issue rather than to simplify it.

It's time to get into position for the biggest economic boom cycle the world has ever seen - growth will come from unanticipated places - at least that's what my crystal ball tells me.  There is going to be a wave of prosperity flowing to all those who allow it - all those who believe that all truly is well.  As is in any phase of history, there will be those who will profit and those who will not.  Are you ready?  Are you in position? Do you understand what you need to do?  I believe that debt is not just an issue for the countries of the world, it is an issue for all of us.  The biggest of changes can start at the bottom and reach up.  We all need to be fiscally responsible and help bring down the burden of debt.  The next time you reach for your credit card, think about whether you can settle the amount you are putting on it in full, or else put it away.  By incurring debt we are spending our tomorrow today.  If you want a tomorrow do what ever you can to eliminate your debt. Every drop contributes to the formation of the ocean.  In the same manner we need to take responsibility for our contribution towards the problems of the world.  Sign up now to put things right, and you will be helping all of us reach the prosperity that we all want.
Coach Z
How does someone who is making nearly $150,000 per year go broke?  I think you really have to try hard.  Sometimes people just don't take action fast enough, it's denial, and by the time reality sinks in, it is usually pretty late in the game.  The worst part about it is that it is so very hard for them to face up to the fact that they are responsible.  Secondly, they don't know who to talk to about it and are embarrassed getting help - they don't really want to tell their friends, so how can they get a referral for someone they can trust?

It's hard, and I've seen it take a huge toll on relationships, but it can be done, and any relationship that can survive this will be stronger and better for it.

If you know of someone who is in this position, advise them to start using cash only for as much of their spending as possible - put away all the credit and debit cards.  Systematic and consistent work can take the problem away.  BTW, my email door is always open and I am willing to help at no cost, no strings attached - I've been through it too, and I am hap
    Disclaimer: MoneyCoach and the managers of the site Investment take no responsibility for the actions of any visitors to this site.  All information on this site is representative of the perspective of the contributing authors and may not reflect facts. All visitors are cautioned to obtain qualified financial advice from licensed individuals.


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