Sin #3 – Greed
In any type of investing — be it stocks, options or mutual funds — it’s easy to get caught up in the thrill of a winner and to keep pushing for more gains. But saving for retirement isn’t a game. And as such, you should make a clear line between what is necessary for your nest egg and what would be nice to have if things go your way.
For instance, let’s say you watched the financial sector bounce back dramatically from the March 2009 lows — with Citigroup (NYSE: C) and Bank of America (NYSE: BAC) soaring 350% in six months, with JP Morgan Chase (NYSE: JPM) and Goldman Sachs (NYSE: GS) tacking on 80% gains in the same period. So to capitalize, you found a mutual fund to play this strength — such as the T. Rowe Price Financial Services Fund (MUTF: PRISX), which doubled during that same March to September period in 2009 that was so good for bank stocks.
Well, outside of a short-lived spike this spring, PRISX has been dead money. Keep that in mind before you go chasing the latest “flavor of the month,” such as gold mutual funds that have done so well lately.