Canadian Personal Finance Blog

This post was originally My Top 5 Investing Regrets of My Life, and I wrote it in response to a challenge from another blogger. This week I have been cleaning up my blogs old posts and I realized I really do have a treasure trove of interesting posts, so I apologize for resurrecting yet another “chestnut” but I really like this post as well. Have a great weekend folks!

Top 5 Investing Regrets of My Life

As part of a writing concept put forward over at Problogger I am making this posting about my Top 5 Investing Regrets over my lifetime. Thanks to Mrs. C8j for proof reading and suggesting content changes as well.

I offer this as a list for folks to learn from, and maybe not make the same mistakes that I have made.

5. Bought Whole Life Insurance

When I was just married and was quite naive when it came to investing, a gentleman from a very large insurance company sold me on the value of whole life insurance as an investment tool and as a way to protect my wife in case something goes wrong. Lots of flashy graphs showing how it becomes self-sustaining, and all of that stuff.

This was a mistake on my part, if I had bought term insurance at the time (I was in my 20’s) I should have paid somewhere around $10-15 per month but I was paying upwards of $50 to $75 a month (I don’t remember the exact amount it was way too much).

I thought this was investing, but I finally met someone who set me on the straight and narrow, and I cancelled the policy, but if I had invested the $40 or so extra I paid a month in an RRSP back then, I’d be much better off now. The good part of it is that I realized my mistake and corrected it, or I’d be looking at this “investment” wondering why I did this. Mistakes happen, but that is why pencils have erasers.

4. Not Understanding the Tools Available

Even after taking two business courses at University I forgot the tools that were available to me on my on line trading site. I monitored things closely but I did not realize the power of the tools that my on line site gave me:

• Bottom limit rules, which I could set up, to automatically sell my investment if they dropped below a certain price. This can limit losses and save you a basket of money.
• Buy orders to pick up a stock I am looking at, at the price that I wanted to buy it. I just bought with a market order, and it went in as soon as I pressed the “OK” button. If I’d looked at the stock and liked the stock, but thought it was overpriced, I could simply put in an order to buy when if it dropped to the price I wanted to purchase it at.

These two simple tools would have saved me a lot of money, if I’d thought a little bit about the tools that were available. Remember, a good tradesman uses their entire toolbox (not just the hammer).

3. Invested with my Heart and not my Brain

This comes back in my #1 mistake, but it’s important to have a Plan for your investments and have a set of rules to work by (and use the tools available to you). If you set down a clear set of rules about when you buy , and when you sell, then you are not relying on your instincts, and your decisions are easily understood.

It’s not hard to make up some simple rules about when you think you should buy a stock, and as soon as you do that rules for when you are going to sell it (because you eventually are going to do that). Some good rules for when to sell:

• Stock drops below a target price after a certain date (so you aren’t constantly buying and selling).
• Stock has not grown by more than 5% in the past year
• Dividend from the stock has either disappeared or has dropped below your goals for the stock
• Stock is now worth twice as much as when you bought it, and you want to remove your original investment, to protect your money.

These are some pretty simple rules, and you should think of your own, but they are something to think about.

2. Did not start an RRSP or Retirement Fund soon enough

This is a common mistake. Saving for my retirement, using sound investment rules, would have me much farther ahead in my life, I think. Set down a set of concrete goals for investing a certain amount of money every year, when you are much younger and you will not be playing the “catch up” game later in your life (as I and others are doing right now). Did I have the money back then? Well, maybe not, but even a little bit of money put away in your past makes your future that much better (it’s kind of like how to get better at playing Golf, go back in time and start playing earlier).

Time can be your best friend when it comes to investing, especially if your investments are growing over that time.

1. Did not sell out of High Tech in 2000

Riding the High Tech Bomb all the way down

I have talked about this blunder before, and being a High Tech guy in the industry, I knew this was a bubble, yet, I “drank the Kool-aid” as well. I fell for the stories being told, and I rode that bomb all the way down to the ground. If I had set rules for investing, I would have at least bailed out and only got singed or lightly burnt, instead of completely incinerated the way my investments did. The funny thing is that my employers stock is the one I got burnt on the worst, and you would have thought I would have known better, but, then again in hindsight I can see what I should have done, but at the moment, it seemed like a good idea?

Take your losses, but also take your profits and move forward with them, don’t just leave your money lieing around, make it work for you.

I hope this helps you, dear reader, in your investing plans. Yet another fine, “do as I say, and not as I do” posting by the Canadian Financial Opinions.

I get hundreds of spam and phishing e-mails at work, and for the e-mail account I use for this blog I get thousands of offers, spam, and phishing e-mails, and I have seen pretty much every one that has been sent (although I still wonder why only my girlfriend worries about the size of my penis, but that is for another post), so someone ignoring an e-mail normally wouldn’t cause me to write a post about it, but, sometimes there is an e-mail you should do something about.

My oldest, who is going to University in the fall got an e-mail last week, that she didn’t act on, and it may end up costing me (potentially) a large sum of money.

What Teenager Doesn’t Check Their E-mail?

That’s a darn good question, and the cost of it, is about 1/2 the cost of lodgings at University next year (and more) from what I can estimate, thanks to one of my children not checking her e-mail in the past 2 weeks or so (or at least not checking this e-mail in specific).

Evidently the University she is planning to attend this fall (if she passes all of her courses in high school) has a large 1st year class arriving in this coming academic year, so the residence board is worried they will not have enough rooms for all of the students who might want to live in Residence, thus they have devised a brilliant plan (IMHO) to deal with this.

One of their existing residence building has fairly large single rooms, so what the school will be doing is putting Bunk Beds into these larger rooms so two students can sleep and live where one would have been previously, which should help alleviate some of the over crowding problem.

The University’s housing folks are smart enough that they could simply force this on to their incoming first year students but that might cause some hard feelings, so instead they turned this problem into an opportunity so they devised a deal to make this an attractive choice, instead of a stop gap fix to their over crowding problem. The solution is ingenious, they sent out an e-mail to students going into first year that made the following offer:

1. Any first year student who volunteers for one of these bunk bed rooms, would only have to pay 1/2 of the normal residence lodging fees (excluding food). That in itself makes it a very attractive deal, but they weren’t finished.
2. In addition any student who is in one of these rooms, gets a free laptop computer and the residence will be set up with wireless Internet, due to the rooms being crowded and maybe not having enough space to study or work. There will be study areas set up to allow for these students to have  a work place somewhere near their rooms.

Great deal, don’t you think? I thought so when my oldest told my wife and I about it on Monday night, after my daughter finally checked her e-mail, however, the deal had been sent out on the previous Thursday and evidently by Friday morning all the spots and volunteers needed had been filled, so we missed out on this deal.

Did we really lose all that money? Not really, but it does go to show that sometimes you should check your e-mail a little more often than once every 2 weeks or so. Lessons we learn in life are never easy, and they always seem to have a large monetary value of some kind, unfortunately.

The topic of what my household spends money on has been discussed before, but here is as a percentage of my entire expenditures, what my family spent it’s money on last month (April 2008)

• Tax 25.24%
• Recreation 19.68%
• Groceries 13.11%
• Insurance 8.88%
• Mortgage Int 5.55%
• Utilities 3.94%
• Auto 3.54%
• RRSP 3.04%
• Commuting 2.70%
• Savings (non RRSP) 2.28%
• Other 12.04%

These numbers are relatively trustworthy since I use Quicken fairly religiously, and my expenses are mostly tracked there (and we don’t really use a lot of cash in our household).

Financial Scary Things

Recreation being 20% of the money I spent things on last month. That is down to my kids recreational activities (basketball). That is one hell of a lot of money, and that is not registration fees or anything like that, that is money spent on going to and coming from and being at tournaments. That one scared the nickels out of my piggy bank.

Why was Insurance there? I pay for my house insurance in one payment every year, and I had to pay it last month. This month it will be big again, because I have to pay my car insurance as well. I also have on going Life Insurance costs that come up for my wife and myself (that was 9% of my spending).

Commuting, is actually the cost of bus passes for my daughters to be able to go to school, so that is not an insignificant amount of capital spent either.

Financial Oddities

The money I am paying in mortgage interest costs is only 6% of my expenditures in a month? Wow, that is really not a whole heck of a lot in comparison to say the amount I spend on Groceries (13%). I honestly don’t know if that is good or bad, it’s mostly confusing, I guess. Anyone care to hazard a guess, I am open to interpretations.

I am also putting 5% away in savings of sorts, in comparison to my total expenditures for the month. Since you don’t know how much I spent last month (no I am not saying what that number is), it’s kind of hard to figure out if this is a good or bad amount (it actually isn’t too bad, and I have to keep remembering that one).

Financial Insights

There are areas where spending can be curtailed, and there will be areas where spending will stop for a while too (specifically recreation), so that is a good thing. My guess is the Auto side of things is going to go up with the cost of gas continuing to go up as well.  I think also this is not reflecting debt repayments either (as this is not a category in Quicken) except for specific mortgage interest as a cost basis point. I’ll need to look at that more as well.

Any comments or insights from my readership appreciated.

One of the important parts of Financial Planning is to have credible and attainable goals and targets for your plan. If you don’t have a target, how can you tell if you are accurate?

With this in mind here is an important example of how if you have a target, your aim gets much better, and thus your aim at the target of your plan is better too.

Aim and Fire

This urinal has a small fly in it, which causes users of this urinal’s “accuracy” to increase by 80% (or decrease “spills” by that amount at least).

The trick is that at Schiphol Airport in Amsterdam (ok outside of Amsterdam), do not have a bathroom attendant who puts a new fly in after each use, no, this is a STICKER of a fly, and this sticker has decreased the mess and filth in the bathrooms at Schiphol.

Look Closer:

What a great idea!!

Punch Line: Remember if you don’t have a target how can you tell if you are accurate or not .