Five mistakes young investors should avoid

Morningstar Morningstar (China) research Center FEI developed world stock markets have been generally bad over the past decade, and the global stock market in 2008 has discouraged many investors, but at the moment, the price of many stocks in the world is relatively cheap in a variety of ways. Being young is the best time for a person to start investing, because the long investment cycle allows investors to fully benefit from compounding in the future. Of course, long-term investment also needs to choose to start at a time when market valuations are low, because there will be more room to rise and less space to fall than school investment. A good investor must learn to do his homework.　　For young investors, while learning to do homework, there are some common mistakes to avoid. Error one: Too conservative young investors, although in the experience of lagging far behind those middle-aged and older investors, but also have their own advantages, the biggest advantage is: time.　　The longer investment cycle allows young investors to take on more risk and thus have the opportunity to achieve greater returns. If you look at the best investments in the US market over the past three years, investors may be inclined to opt for US Treasuries, or even term deposits, as their investment target. From a risk perspective, there is nothing wrong with this choice, but if you want to balance the risks and benefits, and increase the allocation of equity assets, such as stocks, the ultimate effect may be better. Because if inflation is to happen in the future, proper stock allocation will not reduce the purchasing power of assets significantly. American fund companies, such as T. Rowe Price and pioneer, advise investors to allocate assets based on the length of their retirement age.　　For the longest-retired investors, who retire around 2050, their proposed equity asset allocation is 90%. Error two: Ignoring the risk many investors tend to overlook risk when they pay attention to returns. New investors are apt to be attracted by some of the investment items that promise very high returns.　　In the short term certain breeds do get very good returns, and some people like to brag about the amazing returns they've had on one or two of investments, but the amazing returns are usually unsustainable, and when the market falls, these investments can fall even faster. Emerging-market funds are a good example. The returns from these investments have been staggering over the last few years, but the return volatility of such assets is also very high. From 2003 to 2007, the average return on emerging market funds was about 35%, better than any other international fund except Latin America. But the fund fell 54% in 2008 years as international investors shunned risk and fled emerging markets. This year, emerging market funds rose 22% per cent by May 7, 2009. In the International Fund category, the 15-year standard deviation is considered, and only Latin American funds are more volatile than emerging market funds. Volatility is not to say that emerging markets are not suitable for investment, on the contrary, due to the large space of growth, yearsLight investors should properly allocate such assets, whether through mutual funds or index funds. Error Three: One of the most important factors that can affect the long-term return of an investor is the cost of paying too much. If you use a small amount of money to buy and sell stocks, because brokers generally have a single than the minimum commission requirements, investors may be paid for the total investment ratio is very high fees. Buying expensive funds can also cause investors to pay too much. Fund management fees are generally extracted from the total assets of the Fund, directly affecting the Fund's return, the higher the cost, the greater the impact. The Morningstar study shows that the cost rate is the only data point that can affect the long-term return of the fund. Of course, this is an average, and some funds with high cost rates have a good long-term return.　　However, investors should give priority to a fund with a low cost ratio to choose from. Error FOUR: Investment investors are apt to fall into the trap of hot assets, hot industries, and popular stocks by newspaper headlines. In the first half of 2008, for example, soaring oil prices caused many investors to flock to the Energy fund, commodity funds and oil stocks. The strategy of concentrating on investment will be very profitable when judged right, but if the judgment is wrong, the loss will be very large.　　Funds invested in natural resources, including many energy funds, returned more than 13% in the first half of 2008, but lost more than 50% in the second half. In recent years, clean energy has become another hot investment theme. Rising energy prices and human concern for the environment have led to a sharp rise in the share prices of companies engaged in solar and wind services. But by the second half of 2008, when credit markets tightened and venture capital disappeared, the prices of those stocks fell sharply.　　It would be better to give money to a fund manager who is better at it than it is to choose the opportunity to trade hot topics. Error five: At the wrong time stop loss The easiest mistake for a new investor (including many old investors) is to buy and sell at the wrong moment, whether it's high or low. The human instinct encourages investors to buy high when the market is good and sell low when the market is poor, but this behavior can seriously affect the long-term return of investors. Morningstar, while studying the return on the fund, will also study the average real return of the fund's investors. The Brandywine Blue Fund, for example, had a 10-year return of about 2% by the end of April 2009, but the fund's investors lost 15% on average. When you see that the real return of most investors lags behind the total return on the fund, it can show the importance of long-term investment, especially when the stock market performance is poor and many people consider redemption. A firm long-term investor can fully enjoy the rewards of a full market cycle.