There are several ways to get into trouble investing – especially if you are new…… unless you learn and learn fast.

Everyone likes to be right – but overconfidence is one of the deadly sins and this has been discussed in studies of behavioral economics.

MISCONCEPTION 1 – I can get out of the market before it goes down, then get back in for the rebound.

Market timing is moving into or out of the market, or switching between asset classes or sectors based on fundamental or technical signals.  Most investors claim that they don’t try to time the market but they do.   The appeal of market timing is undeniable.  This is not a strategy for winning.

MISCONCEPTION 2 –  Top Performing Funds will continue to be top performers.  False….  The terms is one of the most searched on the internet… and top performing funds don’t always do well year after year.  So much depends on the market and the politics and the fund managers… many people think that they will be on top year after year… but that too is false.  Investors should have an educated point of view about future performance and should not consider past  performance as a promise of future success.

MISCONCEPTION 3 –  Index Funds are safer than actively managed funds.   Index funds can be riskier than actively managed funds in certain markets.   Investors should understand the investment opportunity and decide if they are up for the risk.

MISCONCEPTION 4 –  High Yielding stocks are a bond substitute.  What is the problem with this?   Dividend paying stocks are equities and have considerable downside risk.  The low interest rate environment has created an insatiable demand for yield  from income-starved investors.   There are many sectors  that have downside risks.

MISCONCEPTION 5 – You are not safe in CASH!!!  NO NO NO   Cash is not keeping up with inflation.  So staying on the sidelines is not the answer.   Many people have been hiding out in cash and they not only missed the up part of the market but also a huge return.   I have seen the problems with cash and it will not get you to where you need to go …. so invest in conservative things but YOU NEED TO INVEST!!!!