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Common Investment Mistakes 

  

  A too conservative investment strategy

The South African and international experience is that when faced with investment choice, members often choose a too "conservative" channel relative to the risks they face.
 

This error can have severely negative financial consequences. For example, if a 25 year old member decides to invest his/her retirement savings in the Income Fund over his/her entire working life (i.e. for 35 to 40 years), he/she could end up with a pension some 35% to 50% less than had he/she invested more appropriately in the Balanced Fund (formerly known as the Market Portfolio) for the majority of the time.

 
So, if you are young and you are not concerned about your final payment risk, you should invest primarily to manage your inflation risk. 
 
 
    Trying to "time the market"

Experience shows that some members believe that they can "time" the share market. This means they try to get out at the "top of the share market" and buy back in at the bottom of the share market.
 
The reality is that the vast majority of expert investment managers cannot "time" the market effectively. Expressed another way, it is very difficult to get the market "timing" right consistently.
 
The evidence shows that Retirement Fund members who try to "time" the market usually get it wrong. The evidence also shows that members chase the share market when it is near its highs (the worst time to do so) and avoid the share market after a sharp fall (often the best time to get back into the share market).
 
If you can consistently time the market correctly, you are almost certainly in the wrong job!