Biggest Investing Mistakes
Some of the blogs I visit are listing their top 3 investing mistakes. Here are mine:
(1) Not starting early enough
Like most people this was my biggest mistake. I was young, working for the government and was contributing to a pension plan. Money was tight, but if I'd managed to carve off $25 per week from when I first started working my situation would have been much different. In fact, if I had eaten less meals in the university cafeteria, I could have started even earlier. But like everyone, it's hard to start, and as a result I'll be working into my 60's.
(2) Investing in High Tech / Catching a Falling Knife
I avoided some of the worst investments in hi-tech during the bubble, but I wish I'd sunk all my money into banks (or a mattress) I'd be a lot better off today. I did learn a valuable lesson about not trying to catch a falling knife. I bought Nortel at $70 per share when it was down from $120 per share. I reasoned that it had been $120, and it was worth $120 and it couldn't possibly go lower than $70. But in fact it wasn't worth $120, and it bottomed out at $0.68 per share. Now I know better.
(3) Forgetting about dividends
In the heady days of the hi-tech bubble it was easy to disparage a 3% dividend. But Jeremy Siegel's research demonstrated the importance of dividends. In any case, I should have recognized that dividends serve the same purpose as dollar cost averaging.
(1) Not starting early enough
Like most people this was my biggest mistake. I was young, working for the government and was contributing to a pension plan. Money was tight, but if I'd managed to carve off $25 per week from when I first started working my situation would have been much different. In fact, if I had eaten less meals in the university cafeteria, I could have started even earlier. But like everyone, it's hard to start, and as a result I'll be working into my 60's.
(2) Investing in High Tech / Catching a Falling Knife
I avoided some of the worst investments in hi-tech during the bubble, but I wish I'd sunk all my money into banks (or a mattress) I'd be a lot better off today. I did learn a valuable lesson about not trying to catch a falling knife. I bought Nortel at $70 per share when it was down from $120 per share. I reasoned that it had been $120, and it was worth $120 and it couldn't possibly go lower than $70. But in fact it wasn't worth $120, and it bottomed out at $0.68 per share. Now I know better.
(3) Forgetting about dividends
In the heady days of the hi-tech bubble it was easy to disparage a 3% dividend. But Jeremy Siegel's research demonstrated the importance of dividends. In any case, I should have recognized that dividends serve the same purpose as dollar cost averaging.
posted by Shawn Abigail at 7:23 a.m.
3 Comments:
And what is wrong with working into one's sixties? :) As someone who has no investments other than a fairly decent pension plan, I am resigned to work in one way or another until I cannot work any longer. Does that bother me? Not really. Generally I enjoy what I do, and as long as I can do it I will. To steal another person's statement, they can take my Bible away when they pry it out of my cold dead fingers.
Having said all that. What you have said is very true. Investing early is vital. Investing in proven performers is vital (That is Warren Buffet's approach AFAIK)
I assume I'll be working in some capacity until I die, but hopefully I can at some point get out of the corporate rat race and work at something that pays less financially (or even in a volunteer capacity) but which is more in line with my specific goals for life and ministry. Thanks for your comment Jim.
It is never too late to start. Perhaps you should use mutual funds instead of buying individual stocks, look for a way to achieve a higher dollar cost averaging contribution that doesn't impact your day-to-day, paycheck-to-paycheck lifestyle, and stay focused on the important things such as working at something you love to do.
Most of us tend to hate jobs but few of us despise work.
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