5 Ways to Avoid Common Investing Pitfalls

Emotions and ignorance can cloud your judgment and hurt your portfolio. Here’s how to stay clearheaded and focused.

The start of a new year brings hope and optimism and an opportunity to reflect on some of our financial decisions. Many investors are happy to put 2015 behind them. No asset class performed very well last year. The best of the bunch, equities, yielded a modest 2%, according to data from Societe General, which would make 2015 the hardest year to make money in the markets since 1937. (The 2008-2009 market meltdown was a disaster for equities, but people forget that another asset class, Treasuries, performed strongly during the recent downturn). Even in strong markets, investors often fall into unnecessary traps. Here are five of the most common investment pitfalls and ways to avoid them:

1. Getting emotional about the market. The ever-developing field of Behavioral Finance teaches us that people often rely on shortcuts or "rules of thumb" in an effort to simplify complex scenarios. Many experts believe that these shortcuts in the decision-making process, commonly known as heuristics, are behind many of the financial bubbles that we have seen throughout history.

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Bryan Koslow, MBA, CFP®, CPA, PFS, CDFA™
Founder & President, Clarus Financial Inc.

Bryan is the Founder & President of Clarus Financial Inc., an Integrated Wealth Management firm with offices in New York City and New Jersey.

Bryan is a Certified Public Accountant (CPA), Certified Financial Planner™ (CFP®), a Personal Financial Specialist (PFS), and a Certified Divorce Financial Analyst (CDFA™). He holds FINRA securities registrations Series 7, 63, 65, and has his New Jersey Life and Health Insurance license.