Following bad financial advice can be costly

If you’re in the early stages of your career and you’re earning a decent living, you’re probably in good financial shape now – but what about the future? To achieve your long-term financial goals – a comfortable retirement, college for your kids, a vacation home and so on – you need to avoid bad financial advice.

This negative guidance typically arrives in three forms:

1. “Hot” tips – Whether it comes from the internet, a cable television show or your well-meaning cousin, a “hot” stock tip should immediately send up a red flag. By the time you hear about a hot stock, it may already be cooling off. More importantly, it just might not be right for your needs and goals.
2. Rules of thumb – You can find many questionable “rules of thumb.” For instance, there’s the “120” rule: Subtract your age from 120 to determine the percentage of stocks in your portfolio. So, if you’re 30, you should have 90% of your holdings in stocks, according to this formula. But the “120” rule ignores key factors, including your risk tolerance and time horizon of your goal.
3. Myths – Plenty of investment “myths” are out there. Here’s one: “To invest successfully, you’ll need to buy and sell frequently.” It’s tempting to think you can always make the right moves at the right times, such as buying low and selling high, but it’s a lot tougher than it sounds. Plus, by trading constantly, you can rack up taxes and commissions. Instead, consider buying quality investments you can hold for the long term.

Better advice…

Rather than travel down a path of bad or inappropriate advice, consider some proven suggestions:

• Follow a personalized, goals-based investment strategy. There’s simply no “one-size-fits-all” advice that will work for everyone.
• Understand the nature of risk. There’s more than one type of risk associated with investing, but the biggest risk is not reaching your goals.
• Put time on your side. Generally speaking, the earlier you begin to invest, the less you’ll need to put away each year to reach your long-term goals.

Get some help…

To help ensure you’re receiving guidance that’s tailored to your needs, based on your goals and incorporates your risk tolerance and family situation, you may want to work with a trusted financial professional – and the sooner, the better.