5 bad financial decisions and how to recover

Investing » 5 Bad Financial Decisions And How To Recover

Confusing long term with short term
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There are active management strategies in which a preset event triggers a decision to buy or sell. And then there is random flailing. That would be the strategy in which investors randomly sell positions after losing money and then buy back in after the market recovers.

"One of the biggest mistakes is when you start looking at your long-term investments as short term," says Carlo Panaccione, founder and president of the Navigation Group in Redwood Shores, Calif.

That's most likely to happen "when people decide I'll get out (of the market) until things look better. But by the time things look better, the market has already recovered," he says.

How to recover: If you've jumped out of the market, dollar-cost average your way back in. Dollar-cost averaging involves investing a set amount of money on a regular schedule, regardless of market moves.

"Put in a little bit every month over 12 or 24 months. If the market goes up, you'll get some of the upside. And if it goes down, you'll buy it cheaper," says Panaccione.

If market volatility will worry you in the future, meet with an investment adviser to devise a plan for the next time the market tanks.


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