Here they are:
- Not Creating a Comprehensive Plan. A major error most people make when creating a financial plan is that their plan is too narrow. A sound financial plan is comprehensive in nature and covers all areas of your life, rather than only a single area like an investment portfolio. It should address tax issues, risk management, estate planning, and long-term care needs. These are all vital when creating a solid long-term financial plan.
- Creating a Balanced Portfolio but Never Re-Balancing. Another frequent mistake people make is creating a balanced portfolio—and then not re-balancing it on a regular basis. You should maintain the portfolio balance, as the market ebbs and flows. The original portfolio can and will change over time, as events like a market rally naturally increase overall equity exposure, or retirees take required minimum IRA distributions that may cause an over- or underweight to equities.
- No Follow-Through. The third mistake commonly committed by investors when creating a financial plan is that they spend time creating their plan, but they don’t follow-through and act. You must implement your plan.
Of course, there are plenty of other investment miscues that people make. They try to out-think markets, sell off equities when markets sink and think short term, rather than keeping the big picture in mind. A comprehensive plan is constantly evolving. It needs to be flexible to address changing needs.
Reference: Forbes (April 6, 2018) “3 Common Mistakes To Avoid When Making A Financial Plan”