Ten Ways to Annihilate Your Portfolio - General * US * News * Story

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Ten Ways to Annihilate Your Portfolio

Topics:Personal Finance

By: Cheryl Allebrand, Bankrate.com | 22 Jun 2009 | 12:25 PM ET

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Everyone knows the secret to investment success is to buy low and sell high. The problem is most of us lack clairvoyance.

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We asked experts to weigh in on some of the most common mistakes investors make, and while it's easy to see that chasing hot stocks (the most frequently cited mistake) would be an exercise in futility, they reported other less obvious pitfalls to watch out for.

There are never any guarantees when investing, but avoiding these 10 missteps will better your chances of success.

1. Mismatching investment with goal
Need that money in the next couple years? Don't put it in a hot emerging-markets fund.

Consider when you'll need access to your money. This will help you avoid unnecessary transaction fees, penalties and risk.

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"If you pick the right investment vehicle for the right timeline, you've got it 90 percent in the bag," says Richard Salmen, a Certified Financial Planner and national president of the Financial Planning Association. "If your goal is only six months to two years off, you don't want to put your money in an investment vehicle that could fluctuate enough that you might miss it."

For some goals, such as paying for college, it may make sense to use a mix of investments, says Gail MarksJarvis, author of "Saving for Retirement (Without Living Like a Pauper or Winning the Lottery)."

"If you are saving for college and your child is within three years of going to college, you've still got seven years until that last year of college," she says.

So while the bulk of short-term college savings should probably be very safe in CDs or short-term bonds or a high-yielding savings account, maybe some of that money could be invested in stocks. "Just remember the rule of thumb," she says, "that money you'll need within five years shouldn't be in stocks."

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