Improve your portfolio just by avoiding these common mistakes
Marvin V. Fausto
President, COL Investment Management
Key Points
Are you making these five common portfolio management mistakes? 1. Investing Without a Defined Objective 2. Allowing Emotions to Influence Your Investments 3. Neglecting to Diversify Your Portfolio 4. Skipping Routine Portfolio Checkups 5. Attempting to Time the Market Check out this article to know how to address them effectively.
The Philippine financial markets provide retail investors with numerous opportunities to grow their wealth. However, success in investing is not just about choosing the right stocks or funds—it’s also about managing your portfolio wisely. Unfortunately, many investors unknowingly commit mistakes that can derail their financial progress. To help you avoid these pitfalls, here are five common portfolio management mistakes you should avoid.
1. Investing Without Clear Goals
Investing without a clear objective often leads to random decision-making. Many retail investors jump into the market without thinking about why they’re investing in the first place.
What to Do Instead:
• Define your financial goals, whether they’re for retirement, education, or a major purchase.
• Match your investments to your goals. For example, stocks are ideal for long-term growth, while bonds are for medium-term goals while money market funds may be better for short-term goals.
2. Letting Emotions Drive Investment Decisions
Emotional reactions to market fluctuations—such as fear during downturns or greed during bull markets—often result in costly mistakes. Panic-selling during a market dip or overbuying at the peak of a rally can derail your portfolio.
What to Do Instead:
• Stick to your financial plan and long-term strategy.
• Avoid impulsive decisions based on short-term market movements.
3. Failing to Diversify Your Portfolio
Putting all your money into one stock, fund, or asset class is risky. For example, many Filipinos concentrate their portfolios in a few companies, such as those in the PSEi. If these sectors face a downturn, your entire portfolio could suffer.
What to Do Instead:
• Diversify across asset classes (stocks, bonds, and cash), and even geographies (local and global).
• Consider professionally managed funds that provide automatic diversification.
4. Ignoring Regular Portfolio Reviews
Many investors make the mistake of just buying and forgetting their portfolios. Over time, changes in market conditions or your personal goals can make your original allocation no longer suitable.
What to Do Instead:
• Schedule portfolio reviews at least once or twice a year.
• Rebalance your investments to align with your risk tolerance and long-term objectives.
5. Timing the Market
Trying to predict when to buy or sell based on market conditions is one of the most common—and dangerous—mistakes. Even seasoned investors struggle to time the market consistently. Missing a few of the best-performing days can significantly hurt your overall returns.
What to Do Instead:
• Use peso-cost averaging by investing a fixed amount regularly, regardless of market conditions.
• Focus on long-term goals and let compound interest work in your favor.
Final Thoughts
Managing your portfolio isn’t just about picking the right investment—it’s about managing them wisely over time. Avoiding these common mistakes can help you achieve better results and stay on track toward your financial goals.
If you’re unsure about navigating the complexities of portfolio management, consider seeking guidance from licensed financial advisors or investing in professionally managed funds. The key to success is discipline, patience, and a focus on the long term. With these principles in mind, you can confidently navigate the Philippine financial markets and build a more secure financial future.
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COL Financial is the country’s most trusted wealth-building partner where more than 400,000 Filipinos invest in stocks and mutual funds. COL was founded on the belief that ’every Filipino deserves to be rich’. That is why, for twenty years now, we remain committed to help Filipinos build wealth by continuously providing free seminars, expert guidance and innovate tools.