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You invest, or at least you want to, or you wouldn’t be reading this now.
But have you stopped to consider the investing mistakes you’re making? You know, the investments you’ve forgotten about, or more to the point, the ones you should be forgetting about?
Your Investing Mistakes
Now that you’re investing in yourself. How about fixing one or two of those investing mistakes you’re making.
What investing mistakes? I’m glad you asked.
Investing Mistake #1: Expensive Toys
In today’s consumer culture, we’re bombarded with messages to buy buy buy! But how often do you just stop, and make that conscious decision of if what you’re considering purchasing is something you actually need vs something you think you want?
Most importantly, do you make that choice between this toy, and the months or years sooner you would reach financial freedom if you invested that money instead?
Buy a fancy car, and you worry about someone dinging it in the parking lot. Living here in Silicon Valley, I regularly see six-figure cars driving down the road. A Bentley here, a Maserati there. In fact, a co-worker has an Aventador he drives to work on sunny days. Beautiful cars, yes. But it always makes me laugh to see them parked across multiple spaces in the parking lot trying to keep them safe.
Big wallets, little common sense.
You can rationalize your fancy, expensive car – my commute is so long, I need to protect my kids, I’m successful and deserve it, my professional image requires it. But deep down inside, you know it’s a rationalization.
Buy a fancy house, you worry about fire, theft, flood, act of god. Or just worry about losing your job, and the bank foreclosing on your 6/4 McMansion.
Instead, choose the calmer path.
Worry less about keeping up with the Jones’s and invest your time in what matters most.
While I’m no Buddhist, there is truth in their Second Noble Truth – suffering is caused by craving. The sooner you can control your craving for the latest shiny toy, the sooner you can control your body, your mind, your self.
“Suffering is caused by craving.”
An easy first step to eliminating the toys? Avoid the ads.
We cut the cable cord years ago now, and get more entertainment than we can ever watch.
And best of all? No advertisements.
It’s always a shock when I visit relatives for the holidays and see how many ads are shown on TV these days. It seems like some channels show more ads than they show entertainment, and I’m not even talking about the shopping channels or infomercials!
Investing Mistake #2: Stressful Investments
If you’re checking your investments every day, you’re too worried. Stocks. Real estate, whatever.
Only invest money you can afford to lose, and investments you can afford to ignore.
Personally, I’m a big fan of dividend investing. There’s always the chance of a downturn or other event causing a company to fail – whether it fails to increase its dividend, fails to pay its dividend, or just fails. But when some of these companies have been paying a steadily increasing dividend for decades, that’s a chance I’m willing to take.
If fire-and-forget is more your style, there’s nothing wrong with a low fee index fund or ETF, like the Vanguard S&P 500 ETF (VOO). Depending on your risk tolerance, age, financial state, etc. you can decide for yourself how much of your net worth should be in stocks vs bonds, domestic markets vs international, etc. While simple index funds typically outperform the actively managed funds over the long term, just remember with all things investing, there are the black swans, just like there are the periods where you could lose your shirt if you were unlucky enough to pick the wrong entry and exit times. Hopefully, by diversifying across the entire market via an index fund, you’ve reduced your overall risk.
Peer-to-peer lending is the most stressful investment I have at the moment. However, in this regard I follow my own advice, and have only invested money I can afford to lose. More importantly, I find P2P lending fascinating and enjoy checking my account performance every quarter rather than stressful or distracting. Granted, there could come a day when it’s more stressful than it’s worth. But if that day comes, I’ll close my account and move to something else.
What Matters Most
The most important investment you can make is in yourself. Remember to take the time to discover what matters most to you, and make that the center of your investing strategy.
When your life and your investing are aligned with what matters most to you, you can never fail. You might lose money. But no one ever lay on their deathbed wishing they had spent more time managing their investments.
So take the time and answer that question for yourself.
What matters most to you?
Readers, what are your biggest investing mistakes so far? Have you aligned your investing and your life with what matters most to you?