If you’re like most people, you think estate investment planning is only for the wealthy. The truth is that everyone — regardless of how much money they have — needs an estate investment plan. Here are a few frequently asked questions about estate investment planning, along with the answers that may help you better understand this subject:

What is an estate plan?

An estate investment plan is a program for the management and distribution of your assets upon your death, as well as instructions for handling your affairs should you become unable to do so while you are still alive. Your estate investment plan should include a will and/or a revocable living trust as well as updated beneficiary designations for your 401(k), Individual Retirement Account, savings bonds and life insurance policies. Both a durable power of attorney and a health care power of attorney should also be created. Your Financial Advisor can help you work out the details of your plan and can also help keep it up-to-date.

Why do you need an estate investment plan?

An estate investment plan can not only potentially reduce the taxes your heirs must pay on assets they receive from your estate, but can also ensure that your accumulated wealth will go to the individuals that you intend to receive it. In addition, an estate investment plan can help avoid probate proceedings, an often long and expensive process that can open your financial matters to the public.

What is the difference between a will and a revocable living trust?

Basically, a will is a legal document that directs how your assets will be distributed among family members, charities or others upon your death. It is important to update a will periodically to reflect any material or personal changes in your life.

A revocable living trust (RLT) is an entity, like a corporation, that holds and owns your assets, while you are alive and continues to hold your assets after your death. Like a will, the RLT directs how your assets will be distributed at your death, but because ownership does not change at your death, it can do so without the expense, delay or publicity of probate court. A revocable living trust gives a trustee the right to make decisions for you if you become incapacitated while a will has no effect until your death.

What is a durable power of attorney?

Whether you create a simple will or a revocable living trust, it is important to have a durable power of attorney. A durable power of attorney is a document that designates a person who can sign on your behalf and handle your financial matters in the event of your incapacity. A durable power of attorney becomes void at death.

Having a basic estate investment plan can help ease stresses on your family, especially during a difficult time. Your Financial Advisor, with the help of your tax and legal advisors, can help you take necessary steps today to ensure that your wishes are carried out and that you and your loved ones have the peace of mind you would want them to have.

Five Investing Mistakes You Don’t Have to Make

It’s easy to have confidence in investments made during bull markets: share prices climb and any losses from poor decisions are usually recovered fast. But times of increasing market volatility tend to magnify mistakes, and many investors may lose confidence in their decision making. Let’s take a quick look at some of these common — but generally avoidable — mistakes.

1. Timing the Market

During a downturn in the market, investors who regularly contributed to their portfolios when the market was rising often decide to stop investing until conditions improve. This can prove to be a costly mistake.

Not only is it impossible to time the ups and downs of the market with consistent success — by sitting on the sidelines during a down market, you could miss out on an opportunity to buy stocks and other investments at lower prices. In good times and bad, long-term investors should carefully consider the merits of dollar-cost averaging. By continuing to make investments of the same dollar value at regular intervals, investors can buy more shares when prices are low, fewer when prices are high.

A periodic investment plan such as dollar-cost averaging does not assure a profit or protect against a loss in declining markets. Also, since such a strategy involves continuous investment, investors should consider their ability to continue purchases through periods of low price levels.

It is also important to continue to make contributions to your 401(k) plan or similar employee-sponsored retirement plan. These contributions often “earn” matching funding from your employer — providing additional earnings potential.

2. Skipping the Research

Determining whether an investment is appropriate for your portfolio requires research. There are more companies and investment products to invest in today than ever before, and you need to gather information before you can determine which investments might have potential for growth.

Before making an investment decision, it’s helpful to evaluate it in the context of comparable opportunities. At a minimum, you should find two articles (from different authors) about the company or investment product and review the company’s website. Both the investor relations section and news announcements found on the website can provide useful information. You should also review financial statements and carefully investigate anything that looks vague or unusual.

Not only can doing your homework help you to make informed investment decisions, it can also help you to feel comfortable with the holding in spite of temporary ups and downs.

3. Chasing Past Performance

Yesterday’s hot stock may have already topped out. Today’s innovative start-up may not have the wherewithal to stay in business. So it’s important to base investment decisions on more than past performance and a few headlines. You should invest with the future in mind. If there is strong growth potential, and the fundamental likelihood of the company’s success looks good to you, then it may make sense to invest even after a successful run. Keep in mind, however, that past performance is no guarantee of future results.

4. Trading Too Often

Frequent trading often reduces the total return of your portfolio. In addition to the trading fees and taxes that it may incur, frequent trading does not reflect a long-term outlook and thoughtful investment strategies — neither timing the market nor running from losses enhances your portfolio’s performance.

5. Selling Low, Or Not At All

Before selling a stock or investment product that has tumbled, it’s important to do some additional research to understand why it fell. This research will help you anticipate the holding’s potential for recovery. If the setback appears to result from a temporary problem that can be easily overcome, you may even want to consider buying more while the price is low.

Conversely, it’s also important to know when to take a loss. It hurts to lose money, but a little pain now may pay off in the long run. If your company or investment relies on an industry that is likely to remain weak for several years, consider selling to avoid any additional losses.

Learning from your own past mistakes, as well as from those made by others, is an important step toward becoming a better investor. To find out more about avoiding these and other mistakes often made by investors, contact your Financial Advisor.

This article was written by Wells Fargo advisors and provided courtesy of Adam Dunbar, a vice president-investment officer in Portland. Call 207-774-5626 for more information about estate planning.

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company