Investors must deal with an ever-changing economy that can result in gains and losses in their investment portfolios. It can be very difficult to predict how an investment may perform or when to buy or sell. As you determine your own investment strategies, consider these top five worst moves that an investor can make.

 1         Invest in Only One Area

When planning an investment strategy for your money, you will want to make sure you are diversifying your funds over a few investment vehicles. This will allow for a greater chance of gains offsetting losses. One stock may plunge on a day when another stock experiences a gain. If you own both stocks, you may experience less of a loss on the stock market that day.

Many people choose to invest in the stock market with a mix of stocks, bonds, or mutual funds. They might expand their portfolio to include real estate, like houses or commercial buildings. They may also like to invest in businesses or personal interests, like art or film.

Diversifying could help you survive any perilous investment choices. Investors lost billions when they invested with Bernie Madoff, who was managing a fraudulent investing scheme believed to have been started in the 1970s. When his scheme was exposed in the late 2000s, everyone who had invested with Madoff lost money. Some lost their entire savings and certain charities who invested their endowments with Madoff were forced to shut down. Those investors who had additional savings and funds invested outside of Madoff’s scheme were able to survive Madoff’s actions.

 2         Work with an Inexperienced or Incompetent Advisor

There are so many ways to invest your money and you need judicious advice when considering where to put it. Inexperienced or incompetent advisors can be a liability to your investment strategy. They can even cause you to lose money over time. Therefore, it is important to seek sound advice when investing.

Consult with friends, family members, colleagues and other trusted sources for referrals to good financial advisors. Organizations such as the National Association of Personal Financial Advisors at http://www.napfa.org or the Financial Planning Association at http://www.fpanet.org offer lists of financial planners in your region.

As you search for a good financial planner, avoid those with commissions. They may be motivated to move your money around, whether or not it is really the best strategy for your particular circumstances.

 3         Ignore Investments

Investors should review their investments each year or during any major life change. Over time, your financial goals may change. You may want to start saving for a house, or want to start a family or business. These factors can affect how you invest your money. You may need to move your funds around to accommodate these new goals. 

Investment vehicles can also change over time. One that performed well a few years ago may now be underperforming. Upon examination, you and your advisor may determine that there are better vehicles for your money, so it can achieve greater growth.

Your age is another major factor when determining changes to your portfolio. When younger, you can be more aggressive with investments, allowing for greater opportunity for larger gains. You will have time to recover from any significant losses from the riskier investments. However, as you get older, you will want to be less risky with your money, as you will need to rely on it for your living expenses.

 4         Think Short-Term

Building a strong investment portfolio can take years, and short-term thinking can easily derail your efforts. During periods of strong economic growth, your investments may perform well and you may be tempted to invest above your means to reap more gains. However, if the economy shrinks, you could find yourself without a safety net of savings that will allow you to survive the decline in the economy.

On the other hand, when the economy is in decline, you may see your investments rapidly losing value; this may propel you to consider selling your investments and taking a loss. However, holding on to your investments may be a better decision; they will most likely rise again in value once the economy grows. Work in conjunction with your financial advisor to determine the best long-term plan for you and your portfolio.

 5         Fail To Save

In addition to investing, investors should be building their savings. Because investments are not usually liquid (or easily converted to cash) or they may be in a decline and losing value, investors should have some savings in order to survive a shrinking economy. In addition, they should be taking advantage of any employer-sponsored 401(k) plans. Many companies will even match the funds that an employee allocates to a 401(k), up to a certain percentage. This money can help greatly increase an employee’s retirement savings and be a solid contribution to a strong investment portfolio.