By Ron Phillips
There are many common mistakes we all can make from time to time. Try to avoid these first five and remember to stay tuned for part two of this article.
1. Investing in Variable Annuities When Not Suitable
After reviewing hundreds of investors’ portfolios this is the very biggest error I have noticed. Please don’t take this the wrong way. For the right person in the right situation with the right goals a low-cost annuity can be appropriate. For most people, I think it is unnecessary. The annual fees can have a bad effect on investment performance, sometimes costing over four percent a year of your total assets!
2. Not Having Personal Disability Insurance
According to a recent article in Money magazine, you are more than twice as likely to become disabled before age 65 than to die prematurely. The article continued on with some very good advice when looking for a disability policy: make sure the coverage lasts until age 65 or older; that it covers inability to do your specific job and not complete disability from any job; and, to lower the cost, have a two to three month waiting time before you would receive your benefits.
3. Acting on “Hot” Investment Tips
We have all probably received well-meaning tips and advice from friends and family. You can sometimes get good insights from these sources, keeping an open mind to new ideas. But it can be dangerous to your financial health to act on these tips without getting qualified advice and conducting your own research and due diligence.
4. Not Preparing a Comprehensive Estate and Financial Plan
Your life is busy and growing more complex everyday. There is more information packed into the Sunday edition of The New York Times newspaper than a person received in their entire life during the fifteenth-century. Your financial life is a reflection of that. You may have many aspects that should be taken care of: children, grandchildren, great grandchildren, business equity, cash flow management, retirement, college for your offspring and many other considerations. What you can do is have a complete financial plan drafted up by a qualified financial advisor. You can consult an attorney for a will or trust and other legal documents. Remember to include insurance planning and reviews for total protection.
5. Not Asking Enough of the Right Questions
When it comes to your money and future there is no unintelligent question. You should be fully informed by your advisor. Some questions to ask regarding investments: “What are the total annual fees? Are there charges to enter and exit the investment? How much?”
A few questions to ask about your consultant: “How are you compensated? What is your investment philosophy? What do you invest in? Are you a fiduciary?” You may want to write out these questions and others that are important to you.
Part II of this article is now available HERE
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“Questions are never indiscreet, answers sometimes are.”
Ron Phillips is an Independent Financial Advisor and a Pueblo, Colorado native. He and his wife are currently raising their two sons in Pueblo. Order a free copy of his easy-to-read investor report Creating Your Own Pension That You Can’t Outlive by visiting www.RetireIQ.info or leaving a message on his prerecorded voicemail at (719) 924-5070. Simply mention Promo Code #2001 when ordering.