How to avoid making stupid investing mistakes when the stock market drops

Marketwatch

Tempted by High-Yielding Bonds?

When you see a promotion for a bond that offers eye-watering returns you have to ask the following questions:
1 - How does the yield compare to rates of comparable issuers?
2 - Is the bond issue rated by one of the top three Rating Agencies (Moody's, Fitch, S&P)?
3 - Who is giving any Guarantee or Insurance?
4 - Is that entity rated?
5 - What is the track record of the promoter?
Experience tells that the ordinary retail investor is in no way capable of giving the right answers to these basic due diligence questions.
Investors are urged to consult a financial adviser with no connection to the issuer or promoter before even considering any investment in bonds.
While many bonds issued by seasoned companies can be sold in a recognised secondary market this could be (extremely) difficult or practically impossible with bonds issued by lesser entities.

Taking Emotion out of your Investment Decisions

Understanding Markets, Company Accounts and Macro Economic and Political factors all are critical for investment success. But your Emotions are an often overlooked aspect that can frustrate the best investment plans, especially when faced by a rollercoaster bear market. And even the most seasoned investment professionals sometimes find it difficult to keep a clear head when bombarded with emotional language by media and market pundits.
How to Take Fear Out of Your Investing Decisions (Barron's, Pay Wall)

Don't blindly rely on Robo-Advisers for downside protection

If you think that investing with a Robo-Adviser solves all your investment problems once and for all you may be in for a surprise when the next Bear Market arrives.
How can I get downside risk protection with robo-advisors?

Is your Financial Advisor following Fiduciary Standards?

Even investment experts will find it difficult to understand all the technical standards that are required when advising investors. The growth of compliance and legal staff in Private Banks and Asset Management firms is not only expensive (paid for with your fees) but not always as effective as desired. Careful vetting of any new adviser is something that may only be achieved with the aid of a neutral consultant.
How do Fiduciary Advisers work (CNBC)

ICO? Do not buy what you do not understand

Initial Coin Offerings (short ICO) are an offshoot of the Cryptocurrency Craze, of which Bitcoin is the most prominent product. Quite apart from the fact that most (not even financial experts) do not really understand the concept of ICO's in many cases the use to which the proceeds - your money! - is being put is also less than transparent. What protection do you get once your money is (hopefully) invested? How are profits (if any) shared between public investors and the promoters/insiders? I remain sceptical of all Cryptocurrencies - for better or worse we do HAVE a money and payment system that functions reasonably well. It only goes haywire if some crazed politicians get out of control (Venezuela, Argentina, Turkey for ex). Payments to anywhere in the world can be made in an instant and on superfine rates if you know where to look.
Too many ICO -peddle outright Fraud says regulator

Good points about how to choose a Financial Adviser

But it still needs someone with in-depth financial experience to guide those not spending much time on financial matters through the due diligence process.
You may be at risk in the next bear market if you fail this test

Beware of Private Bankers offering 'products'

Any relationship with a Private Banker or Financial Adviser should be clearly defined. This applies in particular to the responsibility for investment decisions and performance. You either are fully in charge of all decisions - then you really need an execution-only broker, maybe an on line broker offering low commissions - or you give full discretionary authority to the banker/adviser.
The worst situation is where you get 'consulted' about any investment - in the worst case this is just a disguised sales pitch to make you invest in a 'product' that comes with a hefty commission for the banker/adviser. Even though quite a few jurisdictions prohibit these commissions (they can often be paid for as long as the client keeps the investment!) there are ways around these regulations. Firms set up in-house funds that come with fees or - even worse - create 'structured products' that come with opaque fees (and often risks that are not clearly discernible for the lay investor, however successful he/she may be in their own business). It is essential that investors get independent advice before and during the engagement of investment advisers. Fees, Risks and Performance can be monitored for a low annual or one-off fee.
No clear benchmarks, no capital protection, no stop-loss - these should set the alarm bells ringing for any investor/client.

Banks and Asset Management - do they mix well??

Many years ago the standing joke in the world of Investment Management were the captive Mutual Fund subsidiaries of the major banks. They were often used as dumping ground for the new bond or share issues that the parent bank found difficult to place.
Ever since PBA has been suspicious of Asset Management firms that were part of a financial conglomerate. While the regulation and prevention of conflicts of interest (Chinese Walls) has improved enormously it still pays to keep an eye on this potential problem. An independent assessment of costs (fees) and risks will prevent that your investments suffer from any conflicted advice.

Index Funds and ETF's - stay close to the Exit

Index Funds and ETF's may be a wonderful choice in the eyes of many investors - individuals and institutions alike. But one aspect gets not mentioned often enough: apart from the risk that you will be fully exposed to any market decline (how good are your market timing skills?) the relentless flood of money into these instruments/strategies also pushes the already expensive component stocks to an ever higher multiple. It creates a sort of Pentium mobile or self-full filling mechanism. The higher a stock like, say, Amazon climbs, the more money is allocated to this stock - as long as people want to allocate money to the asset class, the stock market in this case.