You can have an IQ bordering the genius level and still make dumb mistakes with your investments.  Some of these mistakes are due to not thinking things through properly while others are the product of years of emotional manipulation by marketing companies or trusted friends and family.  Here are some of the dumbest investment decisions that people make and how to avoid them.

Holding On To Bad Investments

It can be difficult for some individuals to admit to themselves that they invested money into the wrong business, but this denial can cause the loss of a significant portion or all of the money invested.  Others choose to hold onto bad investments because they were inherited from a loved one or because of loyalty to the company.  Unfortunately, this is a disaster that happens frequently and these people lose most if not all of their investments. 

No more than 10% of your money should be allocated towards any one stock and your portfolio should be diversified with several different types of investments to ensure that you are not wiped out if one or two companies fail.  For each stock, you want to identify a price level at which the stock will be sold if it falls to that price and stick to your own recommendations.  This way, you will limit the losses on any investments that go bad.

Chasing Hot Stocks

Many investors make the mistake of chasing hot stocks just as they are about to turn cold, paying an inflated price for the stock and losing most of their investment in a fairly short time period as the market for that stock begins to cool.  If a large number of professionals are publicly singling out a stock for great returns, chances are that the stock has reached its peak and will begin to decline as multitudes of investors chasing a hot stock pour money into the investments.  Investments like these seldom pay investors more than they initially invested and often cause the loss of most of the money invested.

Not Doing Your Research

A large number of investors have investments in their portfolio for no other reason than a source that they trusted called the investment a good deal.  Without doing some independent research into the stock, there is no way to tell if the stock is really a good deal or if someone is trying to convince you to buy junk to increase the price of the units the individual recommending the stock holds.  It is best to investigate any stock tip for yourself and come to your own conclusions about the value of the stock you are considering.

It is important when deciding how and where to invest your savings that you understand the options available to you. While the economy is constantly changing there are some low-risk investments that appeal to investors who are balancing their portfolio or simply unwilling to place money in higher risk vehicles.

I Bonds are basically savings bonds that are issued to consumers by the U.S. Treasury. Backed by the U.S. government, there is virtually no risk of default. The interest rate for the I Bond is adjusted by the changes in the inflation rate. I Bonds have a maturity of five years, however you are able to redeem them earlier than that (minimum twelve month holding period) if you are willing to forfeit the earned interest for the previous three months. After five years an I Bond can be redeemed without penalty and all interest earned is exempt from local and state income tax. Here we look at frequently asked questions regarding I Bonds.

Where can I purchase I Bonds?

I Bonds can be purchased electronically through the government website TreasuryDirect.gov or in person at most financial institutions. There is also an option online to convert existing paper savings bonds to electronic securities using the SmartExchange^sm program.

How much will it cost?

I Bonds are sold at face value which means if you want to invest $100 it will cost you $100. When purchasing online you must invest a minimum of $25. Purchased in person at a financial institution, I Bonds are available in the following denominations; $50, $75, $100, $200, $500, $1,000 and $5,000. The maximum amount of I Bonds that can be purchased in one year is $5,000.

What are the eligibility requirements to purchase I Bonds?

Unlike some other investment vehicles, there are no income restrictions or complicated exclusions with I Bonds. To buy an I Bond you must only be 18 years of age and have a valid social security number.

How are interest rates determined?

The interest rate for the I Bond is actually determined by combining two different rates; the fixed rate and inflation rate. The fixed rate is announced in May and November of each year and will apply to all bonds issued during that period. The fixed rate will remain the same for the life of the I Bond. Added to the fixed rate is the inflation rate which is based on the Consumer Price Index for all Urban Consumers. This rate is also announced each year in May and November.

As to whether or not an I Bond is a good investment, it all depends on what type of risk and return you are looking for when investing your money. The I Bond may not offer the biggest return, however if you are looking for a low risk investment that is fairly liquid, this is a good option to consider.

Why is it that those who have enough money seem to never run out?  Is it because they have so much that they can never come to the end of their money before they die?  It might appear that way, but in reality, that group of people is very small.  Those who are considered well-to-do in our culture include another segment of people that are worth investigating for how they handle their money.

These tips can be just the thing you need in helping to manage your money.

House and property ownership. They own their house and most likely some investment properties as well.  They are no different from other people in that their house is one of their biggest investments.  It holds a lot of importance in their financial portfolio.

Take away: A house purchase can mean as much to you as well.  Finding a home in which you can raise a family and remain for many years gives you a nice nest-egg from which you can benefit later on if you find that you need to sell and it is completely paid off.

Pay cash for vehicles. People who have money do not finance their vehicles.  To them they are a utilitarian instrument that must be paid for in cash.

Take away: Instead of financing every vehicle that you own, save money with which to make a cash purchase.  Also, buy a good used car instead of a new one.  Buying used vehicles can be a wise choice in keeping your debt low and your money available for other more important purchases in life.

Rarely borrow money. The largest loans you will find with the well-off would be on their homes and properties.

Take away: Stay out of debt.  Do not get caught up in high interest credit card or other consumer debt.  Learn to pay cash for the things you need and stop depending on credit cards to get you through your month.

Are business owners. Many of these people are business owners in the community.  They are hard-working and live to make a profit at what they do.  This goes for those in professional business or in a franchise as well.

Take away: Owning a business does not have to be an expensive proposition.  Looking for ways to bring in extra income at home can help you stay out of debt and at the same time fund some very expensive items like college education, etc.

Are very charitable. These people help out in charitable ways in the community that keeps this part of the economy working well.  They are very giving minded.

Take away: Giving to charities is a great thing to do, but equally important is to give away some of your time to worthy causes.

Just because others have more money than do you, does not mean that you cannot live a fulfilled, content lifestyle.  Using tips like the ones above will help you make sure your finances take their proper place in your life:  subservient to your needs and uses.  Do not let money rule you, instead make it your slave and put it to work for you.