When It Comes to Financial Resolutions for the New Year, Consider These Two Simple Words: Get Going

Business Wire, Dec 21, 2005

PLAINSBORO, N.J. -- Merrill Lynch & Co., Inc.:

--By Far and Away, Investors Say "Waiting Too Long to Start Investing" Is Their Biggest, Most Painful Investment Mistake

--For Current Investors, Neglecting the Fundamentals of Asset Allocation, Rebalancing Is Biggest Problem

--Hindsight2insight Program Aims to Help Investors Understand, Address Common Investing Mistakes

Looking for some worthy resolutions for the New Year? Here are a couple of suggestions:

--If you haven't yet started a regular investment program - start one.

--If you already have a regular investment program - take a good look at how your portfolio is "allocated" among the various key asset classes, so that you can assure that your asset mix makes sense given your long-term goals.

Do those things, and you'll avoid two of the biggest and most painful mistakes that investors make, according to research from Merrill Lynch Investment Managers (MLIM). MLIM is a leading global money manager with more than $500 billion in assets under management.

In a nationwide telephone poll examining the investment attitudes of 1,000 investors, conducted in mid-2004, investors surveyed said that their biggest - and most painful - mistake was waiting too long to start investing. Of the investors surveyed, 46 percent said they waited too long to invest. Of those, 25 percent said doing so was their most painful mistake.

Asked about major personal regrets, 28% of investors wished they had started investing earlier. That compares with 15% who wished they had worked harder in school and 9% who wished they had been more ambitious in their careers.

"If experienced investors deeply regret waiting too long to start investing, imagine how large an issue this is with the general population, many of whom haven't even begun to invest," said Robert C. Doll, president and chief investment officer, Merrill Lynch Investment Managers. "Consider the sound of those New Year's horns a wake up call for anyone, particularly people in their 20s and 30s, who doesn't yet have a formal plan for ongoing, disciplined investing.

"It's critical to start investing as early as possible because the benefits of investing and compounding over the long term are so substantial," Doll said. "Investment returns missed early in life are very difficult to recapture in later years. Unfortunately, too many investors learn these lessons in retrospect."

For Current Investors, A Call to Allocation

But even investors who begin investing early with a good plan still might not be addressing what professional financial advisors consider to be investors' biggest mistakes.

Companion MLIM research among advisors found that advisors believe that failure to observe the basic investing fundamentals of asset allocation and portfolio rebalancing are the biggest mistakes that their clients make.

"Investors tend to focus on the 'glamorous' mistakes like riding winners down, holding on to losers, buying on a tip or putting too much money in a single investment," Doll said. "These mistakes may make for interesting New Year's Eve party complaints, but in the greater scheme of things, it's the bigger, systemic failures like ignoring their asset allocation that do the greatest damage to investors' portfolios."

Professional Advice Is Critical

Survey data document the value of professional advice. Investors who use advisors expressed a higher degree of satisfaction and success. Specifically, investors who use advisors:

--Are more likely to have a financial plan (82% vs. 51% of unadvised investors);

--Are more satisfied with their financial situation (78% vs. 67%);

--Are more than 50% more likely (34% vs. 22%) to say they're doing a very good job managing their investments;

--Have a better mix of investments (81% describe their mix of investments as good or better, vs. 68% of unadvised investors);

--Are less likely to go more than 18 months without rebalancing (13% vs. 20%).

"Every investor should consider how they might work with an advisor - regardless of how they rate their investing skills," Doll said. "Even accomplished and experienced investors need a second set of eyes. Advisors bring to bear a professional objectivity and perspective that most investors just aren't equipped to bring to their own portfolios.

"But whether or not you use an advisor, there's no time like year-end to think about how to avoid the common mistakes that can damage financial security," Doll said. "Give your current investment program a thorough review - and if you're not an investor, it's time to get going."

The Merrill Lynch investor survey was conducted in July and August 2004 by the research firm Mathew Greenwald & Associates, Inc. Participants had to be solely or jointly responsible for financial and investment decisions in their household, and have at least $75,000 in investable assets and an annual household income of at least $75,000 (retirees did not have to meet this requirement). The margin of error (at the 95% confidence level) for the 1,000 investors surveyed is /- 3.0 percentage points.