For anyone trying to build or maintain their brokerage account, the current period of increased volatility can be a "scary" time. The latest news surrounding Lehman Brothers and Merrill Lynch is fanning a great wave of speculation about "who's next" in the financial sector and leading many people to re-think what they thought they knew about the financial markets. In a guest column for AOL Money & Finance, William Lynott of Bankrate.com tries to provide some stability and reassurance. Below, he lists the "six deadly investing mistakes" to avoid when trading in your brokerage account:

(1) Panicking over today's market fluctuations

(2) Reacting to daily economic reports

(3) Turning off your buying during a downturn

(4) Trying to time the market

(5) Not maintaining an appropriate asset allocation

(6) Abandoning your investment strategy

As Lynott points out, "sticking with these common-sense fundamentals" can help you maintain your portfolio through today's volatile times and provide some solid grounding during a difficult time.

[image: Mark 48 Torpedo Testing via Wikimedia] 

I don't buy the common sense brainwashing of the 401K/mutual fund industry.  This is an industry which traps people into being fully invested through periods of great risk, and doesn't allow people to hold cash out of peril.  The so called "stable value fund" in my 401K is 48% mortgage backed securities, asset backed securities, and collateralized debt obligations. 

Here is my cynical perspective on the so called  "six deadly investing mistakes":

6) If your strategy has been loosing you money it is insane to continue it.

5) There is no good reason to maintain a loosing asset allocation.

4) Getting out on time makes and saves fortunes.

3) Saving (not loosing) allows buying when blood flows in the street.

2) Pay attention to official lies reversed (Paulson: Fannie is secure).

    The lies are the big tells.

1) People who don't jump off the tracks get run over by trains.

Here are are my "deadly investing mistakes" I am participating in:

1) Last night, I logged onto my credit union website.  I transferred all my money market funds (uninsured) into savings accounts.  I may loose a couple percent in interest, but if the money market freezes, I will have money to pay the rent, eat, and have money to move to the tropics.

2) I bought some ultra-short funds in my 401K and IRA because I see a lot of lies told at high levels and the 'safe' options hold bad stuff. 

3) I stopped contributing to my 401K last month because it is a trap.  It is a deferred tax account.  I am better off paying taxes before taxes are raised to pay for bailouts.  The money is worth more outside the 401K because there are better investment opportunities outside without penalties.

I take issue with the last gobbly gook. 

As Lynott points out, "sticking with these common-sense fundamentals" can help you maintain your portfolio through today's volatile times and provide some solid grounding during a difficult time.

Argument from authority is a fallacy of reason.  Lynott uses appeal to tradition ("sticking with these common-sense fundamentals") also a fallacy of reason.

Why does Lynott say mainting a portfolio is more important than maintining your worth?  Why do the likes of these people wish others to treat liquid assets as illiquid?  Could it be because they don't want compitition when selling or shorting? 

Points well taken. While the 401K/Mutual Fund industry may be guilty of some "brainwashing" (or at least, some clever marketing), many of their findings are actually substantiated by research and backed by the findings of modern portfolio theory. Especially when it comes to the value of asset allocation and portfolio diversification and the problems with market timing. The real problem occurs, as you point out, when "reality" does not match up with what we are told by elected officials and other individuals in prominent positions.

- The TradeKing Blog