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.
I offer this as a list for folks to learn from, and maybe not make the same mistakes that I have made.
My Top 5 Investing Regrets
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.
Example of investing with my heart? I bought the WWF (WWE), seriously what was I thinking?
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
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.