Avoid The Biggest Financial Mistakes

    Published: 06-16-2009
    Views: 97,212
    Financial advisor Ric Edelman discusses how to avoid the biggest financial mistakes.

    Ric Edelman: Hi, I am Ric Edelman. In this series we are talking about some of the biggest financial mistakes I have seen people make and here is a really common one, investing in the wrong way.

    One is buying investments based on the past. You see, if an investment really well that makes you tempted to want to buy it, it's a winner you think. But past performance does not guarantee the future. It will be like saying that because it rained yesterday it's going to rain today, we know that's not true. Here is a similar problem, buying an investment after it hits an all time high, bad idea.

    Look at real estate; if you've bought at the peak of the bubble in '06, you are regretting it now and the same thing with gold. Nobody wanted to buy gold when the price was low, but now that the price is high it's all people talk about.

    It's much smarter to create a diversified portfolio with many types of investments. One mistake I see time and again, taking financial advice from people who know little or nothing about personal finance. You know who they are, coworkers!

    Yeah. Somebody might say I moved my 401k to cash or I have stopped contributing until the market improves and you should too. This can be very dangerous advice. Another piece of bad advice, only contribute enough to your 401k to get the employer match. That's terrible advice.

    Employer retirement plans are the best way for you to save for retirement regardless of whether or not there is a match from your employer. If you don't put any money in, you won't have anything in retirement.

    How do you avoid making a mistake of your own? One tell-tale warning sign, watch out for statements that are made in absolute terms. You can't loose with real estate. Insurance is a great investment pay off your mortgage. A professional financial advisor can show you how to eliminate debt, build cash reserves, buy and manage investments, develop in estate plans, save for college and retirement, make the best use of employer benefits and buy the right insurance along with other financial issues.

    The truth is there is no one single blueprint to follow for everyone. The right advice depends on your situation.