Offshore Investments
Many investment deals are based offshore, normally in locations such as Cayman Islands or the Turks and Ciacos Island. Avoid them
Why? The United States is a large country with well reputable laws and a comprehensive regulatory system. The main purpose of establishing an investment offshore is to avoid the US regulations. The funny thing is investors actually need more regulations not less. These deals abroad have a much bigger chance of engaging in questionable conduct than that of the US.
Plus if you believe investing abroad protects you from the internal revenue service, then you are wrong. A current agreement between Swiss banking giant and the US and Swiss government provided for the release of the names of wealthy Americans who thought they outsmarted the IRS by secreting money in Switzerland. Those individuals are now scrambling to turn themselves in and hoping to avoid prison time for their conduct.
Investing too conventionally
Long term investments, in general, will do better in the stock market. The long term annual average return for the stock market over the past century is around 10%. You could, of course, do better or worse than that in the years that you invest. But if you save for your retirement just with bonds or CDs or even real estate, you may find that you've underperformed needlessly in the long run.
Do not hold on for too long.
Why did you buy a given stock? Are the reasons still valid? Has anything important changed? Have you gained as much as you expected to in it? These are the sorts of questions you should think over over regularly. Be prepared to sell under certain circumstances, whether you've made or lost money so far.
Basing decisions on tax concerns
You need to consider the tax consequences of your investments. Don't buy municipal bonds, for example, just because they're tax-free. Their return may not be better than the after-tax return of a higher-yielding option. Tax-free investments, like all others, must fit into your overall investment strategy.
Avoiding the stock market altogether.
All this talk of risk may make you nervous. But resist the temptation to bury your head in the sand and hide your money in the bank. You may think you are playing it safe but you're not. You're letting inflation bite your savings. “People who have no tolerance for risk in the stock market are taking an alternative risk - a loss in purchasing power”.
