Four ways investors are being fooledWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
April Fool’s Day is only a few days away, so be on the guard. Over the years, we have had our share of gags and pranks.
Usually, it’s Brent in our office. One year, he loosened the bolts on the office chairs, so they collapsed when we sat down. The only thing that was initially hurt was our self-esteem, already suffering from winter weight. But beware of traps when it comes to finances.
In the past few weeks, we have seen an incredible rally on Wall Street and many investors are wondering if they should hold off and wait until their investments come back before making any changes?
Waiting may not be the best thing. According to BTN Research, the 2000-2002 bear market lasted 30 and half months, and so far it’s only 17 months into this bear market.
The Moody’s Recessionary Index still indicates a significant risk the economy will be in a recession six months from now.
Long-term, the markets will recover. Short-term, we still see significant risk, and instead of waiting to see, informed investors should take this short-term market rally as an opportunity to get their accounts properly positioned for the long-term recovery.
Review the disclosed and undisclosed fees and expenses in accounts and review the performance of accounts versus the unmanaged index.
Listening to the wrong people can be foolish. We watch financial news on a more regular basis in light of where the economy has headed. But short-term, almost no one can predict the direction of the stock market. In fact, nine Wall Street equity strategists at the beginning of 2008 predicted the market would gain 10 percent in 2008, when in fact it was down 39 percent.
Others listen to people who aren’t even in the business of finance. Sure, friends, family and co-workers care about your financial well-being, but implementing the wrong financial advice can be a disaster. Instead, focus on a long-term plan and make adjustments along the way.
Watch out for fool’s gold. Chasing hot investments or buying investment ideas that seem too good to be true can be dangerous. Played out on the nightly news is the ponzi scheme of Bernie Madoff that caught big-named celebrities off-guard. Many local investors were caught by what happened here with Tom Noe and the Ohio Coingate scandal. Then, there was the recent sentencing of John Ulmer and others who committed fraud at the Westhaven Group. Although all the homework in the world can’t protect against every fraud, doing some research upfront and trusting your gut can help. Check out www.sipc.org to find out more about how to be protected from fraud with information provided by the Securities Investor Protection Corporation.
So watch out, not just for fun pranks on April’s Fools Day, but be careful you don’t get fooled with your finances. These financial traps can catch you off-guard and cost a small fortune.
For more information about the column and The Retirement Guys, tune in every Saturday at noon on 1230 WCWA and every Sunday at 11 a.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is located at 1700 Woodlands Drive, Suite D, Maumee, OH 43537.