Investment
These are the 8 biggest investing mistakes, according to financial professionals – USA TODAY
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Top 5 investing mistakes that are easy to avoid
Even seasoned investors make mistakes at times. But when you start investing, you’re prone to letting your emotions take over.
Investing is key to building wealth, but you could undermine your efforts if you make some common errors. Recent research from the Natixis Global Survey of Financial Professionals identified the eight biggest investment mistakes financial professionals believe are the costliest errors you can make. Here’s what they are.
1. Panic selling
A whopping 93% of financial professionals identified panic selling as a top investing mistake, and with good reason. When you see your investment account balance start to fall or the economy starts to look shaky, it’s hard not to make bad decisions based on the fear of losing everything. Unfortunately, selling when the going gets rough is a surefire recipe for disaster. It means you’ll always end up selling low and missing out on the recovery that almost inevitably follows any market correction.
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The good news is that this error is easy to avoid if you have a solid investment strategy. If you’re confident in your investments, you can step away from your portfolio during downturns to avoid the temptation to sell. Or, you can make the smart play and invest more money and take Warren Buffett’s advice to be greedy when others are fearful.
2. Trying to time the market
On the surface, aiming to buy stocks when share prices hit rock bottom and to sell when they’re at their peak seems like a good strategy. The problem is that most people can’t predict exactly when share prices will hit their optimum point. And missing even just a few good days in the market due to poor timing could leave you hundreds of thousands of dollars poorer.
That’s why it’s not surprising that 50% of financial professionals list market timing as a top mistake. This is also easy to avoid, though. Dollar cost averaging, or buying shares on a regular schedule over time, eliminates the need to determine the perfect moment to buy shares.
3. Failing to understand your risk tolerance
There’s generally an inverse relationship between risk and potential reward, where the riskier the investment, the greater the potential returns. Unfortunately, 45% of financial professionals indicate that a failure to understand risk tolerance is a top mistake investors make.
You need to make a calculated, informed choice about how much risk you’re willing to take in order to decide how much money to put into stocks (which are riskier but present an opportunity for higher returns), as well as whether to invest in index funds (the safer bet) or individual stocks (which provide a chance to beat the market).
Risk tolerance is something that should change over time. Before you start seriously investing, think about how comfortable you are taking chances with your money and let this guide your investing strategy.
4. Having unrealistic expectations of returns
It’s important to make reasonable projections about how much your investments will earn. If you expect a 20% average annual return, you may think you need to invest a lot less than if you expect 2% average annual returns.
Unfortunately, 43% of financial professionals indicate that unrealistic expectations of returns is a major mistake investors are making. To avoid this, look at the historical performance of investments you’re considering, and study the fundamentals of any stock you plan to buy to assess its realistic potential.
5. Taking too much risk in pursuit of yield
While many investors misunderstand their own risk tolerance, others take on too much risk and gamble with their futures. That’s why 25% of financial professionals identify taking on too much risk as a costly investment mistake.
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If you invest in high-risk investments or put too much of your money into the market, you stand the chance of facing outsized losses if things go wrong. Instead, make sure your asset allocation and risk exposure are appropriate to your age and objectives. If you’re saving for retirement, for example, subtract your age from 110 to determine what percent of your portfolio should be in the stock market.
6. Failing to recognize the euphoria of an up market
This is the opposite of panic selling, and 25% of financial professionals indicate it’s also a very costly error.
When investors get too excited that things seem on the upswing, this leads to asset values escalating without justification. You could easily end up buying in a bubble and getting stuck with a portfolio full of overvalued stocks. The good news, however, is that dollar cost averaging and a sound investment strategy focused on the fundamentals of each company can help you avoid this error too.
7. Focusing on cost rather than value
Far too many investors focus too much on share price at the expense of considering what shares are actually worth.
This often leads to an inaccurate belief that stocks under $5 are a “bargain,” even if the companies are unproven or haven’t published much financial information. It could also lead inexperienced investors to assume stocks with a high share price are worth their cost just because of their high price tag. These types of errors are likely why 19% of financial professionals identify a focus on cost rather than value as an expensive mistake.
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The reality is that a stock that costs $5,000 per share is a better value than one that costs $10 if the first is likely to double and the second will most likely lose half its value. The key is to look at the company’s past performance, leadership team, competitive advantage, and potential for growth when deciding which is a better buy.
8. Failing to consider the tax implications of investment choices
Finally, 9% of financial professionals indicate that a failure to consider the tax implications of their investments is a costly error people are making.
This can be a problem if, for example, investors miss out on the chance to take advantage of favorable long-term capital gains rates, or if they don’t engage in strategic tax-saving moves such as tax loss harvesting. Understanding the tax rules that apply to investment income is a good way to avoid this error.
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The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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(Bloomberg) — Ping An Insurance (Group) Co.’s profit dropped 4.3% in the first quarter as stock-market declines and falling bond yields eroded investment returns.
Net income fell to 36.7 billion yuan ($5 billion) in the three months ended March 31, from 38.4 billion yuan a year earlier, the Shenzhen-based company said in a filing to the Hong Kong stock exchange Tuesday.
Operating profit, which strips out one-time items and short-term investment volatility, fell 3%.
China’s stock market rout at the start of the year and lower bond yields have weighed on insurers’ investment returns. They hurt profit even as more customers seek to buy savings products. Co-Chief Executive Officer Michael Guo said last month that profitability will recover after a 23% drop in net income last year.
“China’s macroeconomy gradually recovered in the first three months of 2024, but there were still challenges,” the company said in a statement, citing weak domestic demand. “In response to volatile capital markets and declining treasury yields, Ping An continued to pursue long-term returns through cycles via value investing.”
Read More: Ping An Trust Wins First Court Ruling Over Delayed Trust Product
Net investment yield of insurance funds dropped to 3%, the statement said, down from 3.1% a year earlier. Real estate investments fell to 4.2% of the 4.9 trillion yuan portfolio, from 4.6% the year earlier.
The CSI 300 Index slumped as much 7.3% this year through the start of February, before government intervention fueled a rally.
New business value, which gauges the profitability of new life policies sold, rose 21% in the first quarter. That followed a 36% jump last year as the company’s efforts to improve the productivity of life agents started to bear fruit. NBV per agent jumped 56% from a year earlier, the statement said.
Ping An shares rose 3% to HK$33.00 in Hong Kong trading on Tuesday, trimming the year’s loss to 6.7%.
(Updates with company comment in fifth paragraph, more details afterwards)
©2024 Bloomberg L.P.
Investment
Own a cottage or investment property? Here's how to navigate the new capital gains tax changes – The Globe and Mail
Two brown Adirondack chairs on a wooden pier with a yellow canoe. Across the calm water is a brown cottage nestled among green trees. Canada flag is waving on a pole.flyzone/iStockPhoto / Getty Images
New rules for taxing capital gains mean quick decisions are required for cottages that families have owned for decades, and investment properties as well.
Until June 24, you can sell a second property or cottage and pay tax on just half your capital gain, however much it is. After that date, the recent federal budget proposes to increase the inclusion rate on capital gains greater than $250,000 to two-thirds. Capital gains of this size can easily be envisioned in the property market after the massive price gains of the past 10-plus years.
“From now until June, we might be seeing some hasty sales to bypass the increase in capital-gains tax for those people who have held a property for long enough to realize that gain above $250,000,” said Diana Mok, adjunct professor at the University of Western Ontario and an expert on real estate finance.
But maybe you don’t want to rush into anything. Historically, the capital-gains inclusion rate has many times been adjusted up and down. The rate went from half to two-thirds in the late 1980s and then up to three-quarters from 1990 to 1999. In 2000, it was chopped back to two-thirds and then again to 50 per cent.
The next opening for a change would be after the next federal election, which is expected by fall of 2025 unless the minority Liberal government falls earlier. People may want to hold on to secondary properties until after that election. “I think this is a huge reason that people will be focused on the Conservative Party,” said Lani Stern, broker and senior vice-president of sales at Sotheby’s International Realty Canada.
Mr. Stern said he’s advising clients to sell only if they already had plans to do so. The federal government’s budget documents suggest there’s an expectation of a bulge of capital gains-generated tax revenue in general this year as people try to get ahead of the higher inclusion rate.
A capital gain is the difference between the purchase price of a home, stock or other asset and the sale price. The inclusion rate is the portion of the gain that is taxable. Currently, the 50-per-cent inclusion rate on a $500,000 capital gain means a taxable gain of $250,000.
The taxable amount of a $500,000 gain under the new rules would be $291,750. That’s $125,000, or 50 per cent of $250,000, plus $166,750, which is 66.7 per cent of the other $250,000 portion of the $500,000 gain.
Your margin tax rate would determine how much tax you actually pay on these gains.
Draft legislation for the new capital-gains rules has yet to be issued. But John Oakey, vice-president of taxation at Chartered Professional Accountants of Canada, said he believes it will be possible for capital gains to be split on the sale of properties co-owned by spouses. Each spouse would be able to report up to $250,000 in capital gains at the 50-per-cent inclusion rate.
The higher inclusion rate was billed in the budget as a way of targeting high-net-worth individuals, but middle-class families could be caught up as well in selling family cottages bought decades ago at a fraction of their current value. A principal residence can still be sold tax-free, but the gain on a cottage or investment property is taxable.
“Whether/when to transfer cottages to the next generation is a perennial question for many Canadians,” Andrew Guilfoyle, partner at Chronicle Wealth, said by e-mail. “The time crunch could make this much more difficult to execute versus simply realizing capital gains in an investment account of public stocks, as there will be legal documents and valuations needed.”
Prof. Mok sees the impact of the higher capital-gains inclusion rate being felt more by long-term investors than those who are flipping properties. “I could hardly see even the hottest market in Canada, such as Toronto, gaining $250,000 within a year or two,” she said.
Longer-term real estate investors will adjust to the higher tax rate, Prof. Mok predicted. Her thinking on this is influenced by what happened in Toronto after the introduction of a municipal land-transfer tax in 2008. Some observers thought house prices would cool down or fall, but that never happened. Similarly, people will adjust to the new capital-gains tax rate.
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Investment
Looking for Once-in-a-Generation Investment Opportunities? Here Are 3 Magnificent Stocks to Buy Right Now – Yahoo Finance
I disagree with the adage that “opportunity only knocks once.” At least, I don’t think it’s always true with investing. That said, there are inflection points for some stocks after which things will never be the same.
Looking for these kinds of once-in-a-generation investment opportunities? Here are three magnificent stocks to buy right now.
1. Occidental Petroleum
You might be surprised to see an oil stock on this list. Aren’t companies based on fossil fuels in danger of becoming fossils themselves? Not if Occidental Petroleum (NYSE: OXY) has its way.
Occidental is at the forefront of developing direct air capture (DAC) technology. DAC extracts carbon dioxide directly from the air. Oxy CEO Vicki Hollub’s goal is to produce “net-zero” oil where the CO2 captured in the production of the oil effectively cancels out the emissions produced by using the oil. Hollub believes if DAC fulfills its potential, her company will be able to “produce oil and gas forever.”
Carbon capture could also open up a massive new opportunity for Occidental and other pioneers. ExxonMobil projects a carbon capture and storage market of $4 trillion by 2050. Unsurprisingly, the oil and gas giant is also investing heavily in the technology.
Occidental is potentially at another inflection point as well. Warren Buffett’s Berkshire Hathaway currently owns 28% of the company. Buffett has made clear Berkshire doesn’t want to acquire Oxy. However, I suspect the conglomerate will continue to aggressively buy shares of the oil producer — especially considering Berkshire secured regulatory approval to purchase up to 50% of the company. Occidental could become a near-subsidiary of the conglomerate even if doesn’t have majority ownership.
2. UiPath
I think artificial intelligence (AI) will create many once-in-a-generation investment opportunities. And those opportunities aren’t limited to the tech giants that typically capture the headlines. UiPath (NYSE: PATH) is a much smaller company with a market cap of under $11 billion that could be on the threshold of a new era.
UiPath is a leader in robotic process automation (RPA). The idea behind RPA is to automate online tasks to improve productivity. RPA isn’t new: UiPath was founded in 2005. However, generative AI could be a game-changer that leads to explosive growth.
A recent survey UiPath conducted with consulting firm Bain found that 70% of corporate executives believe AI-driven automation is “very important” or “critical” to the future of their industry. Eighty-four percent of executives believe AI “will radically change how businesses operate in the next five (5) years.”
UiPath is seizing this opportunity. The company recently launched preview versions of its AI-powered Autopilot for Studio product for developing process automation using natural language and Autopilot for Test Suite to improve productivity in testing. In March, UiPath introduced new generative AI capabilities for its platform.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) commands a monopoly in treating the underlying cause of cystic fibrosis (CF). It’s in the early stages of the commercial launch of the first CRISPR gene-editing therapy, a one-time cure for two rare blood disorders. But those aren’t why I think this biotech stock is a once-in-a-generation investment opportunity.
The company could have another megablockbuster franchise waiting in the wings in treating pain. Vertex plans to file for regulatory approval of non-opioid pain drug VX-548 this summer and is already preparing for a near-term commercial launch. VX-548 could fill a big gap between anti-inflammatory drugs that are safe but not as effective and opioids that are effective but highly addictive. The biotech is also evaluating other promising non-opioid pain therapies in phase 1 and 2 clinical studies.
Vertex recently advanced inaxaplin into phase 3 testing for treating APOL1-mediated kidney disease (AMKD). It hopes to seek accelerated approval if an interim analysis at week 48 of the study looks good. There are no approved therapies that treat the underlying cause of AMKD. The disease affects more patients than CF.
There’s more. Vertex’s pipeline includes programs that hold the potential to cure type 1 diabetes. The company also recently announced the planned acquisition of Alpine Immune Sciences. Alpine expects to advance its lead candidate povetacicept into late-stage testing later this year in treating IgA nephropathy, another disease that affects more patients than CF and with no approved therapies for treating the underlying cause.
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Keith Speights has positions in Berkshire Hathaway, ExxonMobil, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Berkshire Hathaway, UiPath, and Vertex Pharmaceuticals. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
Looking for Once-in-a-Generation Investment Opportunities? Here Are 3 Magnificent Stocks to Buy Right Now was originally published by The Motley Fool
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