Investor Mistakes Archives

Whose plan are you following?

Mistake 1 of 10: investing without your own goals and expectations. Write each goal as a SMART goal, then test it in a best, base and worst case.

Capacity, willingness and requirement: the three sides of risk

Mistake 2 of 10: taking the wrong amount or kind of risk. Risk has three sides (capacity, willingness and requirement) and three responses: avoid it, reduce it or transfer it.

Too concentrated, or too diversified?

Mistake 3 of 10: concentrating too much, or diversifying badly. Two ways to get diversification wrong, and a five-minute check for both.

Why popularity makes value harder to judge

Mistake 4 of 10: buying high and selling low. Money tends to arrive after the good returns and leave after the bad ones, and investors pay for that timing.

The best days sit next to the worst days

Mistake 5 of 10: timing the market and trading too often. Stepping out to avoid the bad days usually means missing the good ones, because they tend to arrive together.

What you keep, not what you earn

Mistake 6 of 10: paying too much, or letting taxes drive decisions. Fees compound quietly, and taxes deserve care, but neither should make the investment decision for you.

Do you know your real return?

Mistake 7 of 10: measuring the wrong performance. Your real return is what your money earned after fees and inflation, against a benchmark you chose in advance.

Plans fail quietly

Mistake 8 of 10: neglecting the plan. Most plans fail from neglect, not crisis: never started, never reviewed, or stalled on a conversation nobody wanted to have.

Five checks before you hand anyone your money

Mistake 9 of 10: hiring an adviser without checking. Five checks take less than an hour, and most investors never make them.

Your savings rate: the lever you control

Mistake 10 of 10: watching returns while ignoring the savings rate. Early in a career, saving three more points can outweigh a point of extra return, and the savings rate is yours to set.