My Biggest Investment Mistakes

by RJ

in Investing

The biggest investment mistake of my life came early.

My story…

When I was 21, I had some cash that I wanted to invest. I went to an investment advisor recommended to me through my dad. My dad used his services and I thought it would be a great idea if I did.

I sat down with the advisor. He told me about his services. I was all excited and wanted to start that day.

I previously  picked out about 10 individual stocks, a few mutual funds and even a few ETF’s. I wrote a check and soon after my savings were invested.

Though this story is short, here are the mistakes that I made.

Mistake # 1 – Not Knowing the Fees

I didn’t know the right questions to ask the advisor. Yes, he explained to me the fees. I for some reason thought this wasn’t a big deal.  For $500, I could buy and trade all I wanted.  There was also, a monthly account management fee. Again, I thought this was normal.

Mistake # 2 – Not Having Goals

I was cocky college finance major. I thought I could evaluate a business in an hour.

The stock market was going up. I wanted in.

My goal – earn more money than I started off with.   I didn’t have a purpose.

I read a few books on investing that were highly rated on and started within a month. Not only did I end up reading investment books that didn’t apply to me, I implemented them all.

I had a portfolio of about 10 individual stocks, some mutual funds, and some ETF’s. This portfolio sucked. It cost a lot of money. The investments overlapped. I had no exit strategy. It was tax-inefficient.

Mistake # 3 – Not Understanding the Importance of Roth IRA’s

I had already contributed $2,000 a year to a Roth IRA. I didn’t even think about maxing out my Roth IRA.

This is what happens when you have no purpose to your money.

Mistake # 4 – Having a Complex Portfolio

Since I decided to implement a few strategies, I thought I was well diversified.

One strategy consisted of investing in individual stocks. Another strategy consisted of investing in ETF’s. The third strategy consisted of owning a few diversified mutual funds.

Mistake # 5 – Investing in Recommended Individual Stocks and ETF’s

I had a few websites that I thought were always right on with picks. My complex research was tracking the stock picks for about a month from a few different websites like TheStreet and Yahoo Finance. (Nobody knows about these sites right?)

I did about an hour of research on each company, which is probably about 5,000 hours short of what Warren Buffett does.

Mistakes # 6 – Not Reading The Bogleheads’ Guide to Investing

This is by far the best book I’ve read on investing. It’s simple to understand. The actions are easy to implement.

If you want to start investing, start by reading this book.

What I learned

Looking back, I’m glad I made the mistakes than rather than now. I would estimate that not knowing what I was doing, cost me around $1,000. However, it couldn’t have happened at a better time.

Have you made any similar investing mistakes? Please list any regretful investing mistakes you have made in the comments below.

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{ 1 comment }

DanielNo Gravatar November 2, 2009 at 8:57 am

If you could go back, what would your goals have been? I’m in a similar situation to your 21 year old self in that I have some money to invest (or save, or spend), but am not sure what to do with it. Sure, I could put more in my Roth IRA, but does that make more sense than saving for a few years down the road?

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