Most investment mistakes are caused by basic misunderstandings of the securities markets and invalid performance expectations. The markets move in unpredictable, but cyclical, patterns of varying duration and amplitude.

Evaluating the performance of the two major classes of investment securities needs to be done separately because they are owned for differing purposes. Stock market investments are expected to produce realized capital gains; income-producing investments are expected to generate cash flow.

Investment errors occur most frequently when judgment is influenced by emotions such as fear or greed, hindsightful observations, and short-term market value comparisons with unrelated numbers. 

Your own misconceptions about how securities react to varying economic, political, and hysterical circumstances are your most vicious enemy.

Master these ten risk-minimizers to improve your long-term investment performance:

1. Develop an investment plan. Identify realistic goals that include considerations of time, risk-tolerance, and future income requirements— think about where you are going before you start moving.

A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy speculations.

2. Learn to distinguish between asset allocation and diversification. Asset allocation divides the portfolio between growth and income purpose securities. Diversification limits the size of individual holdings in several ways. Neither activity is a hedge or market timing devices.

Neither can be done precisely with mutual funds, and both are handled most efficiently using a cost based approach like the Working Capital Model.

3. Be patient with your plan. Although investing is always referred to as long- term, it is rarely dealt with as such by investors, the media, or financial advisors. Never change direction frequently, and always make gradual rather than drastic adjustments. Short-term market value movements must not be compared with un-portfolio related indices and averages.