GMR 137: Most Common Investing Mistakes

We hear a lot about investing and how important it is to save for our futures. Yet, many people are slow to invest. In this episode of GMR, we talk about the most common investment mistakes, and yes, not investing [or not investing sooner] is one of the biggest mistakes.

Show Notes

This episode is inspired by an article in the Sound Mind Investing Newsletter called “Are You Making Any of These Common Investing Mistakes?” by Austin Pryor & Matt Bell | 07/29/20

Most Common Investing Mistakes

  • Waiting too long to start investing.

  • Not getting educated on investment basics earlier.

  • Not investing based on a long-term plan.

  • Too busy with other things.

  • Not having margin.

  • Over investing in a single stock or employer stock.

  • Over delegating the responsibility of managing their investments

  • Investing in “opportunities” with unusually high rates of returns

  • Trying to time the market

Waiting too long to start investing

  • The mistake — not beginning to invest at an earlier age — was one of the most frequently mentioned investment-related regrets. Good intentions often are overcome by dozens of questions that arise when people try to get going. Where do I open my account? What do I invest in? How do I do this exactly? Busy schedules push the answers to the back burner.

  • Episode 12 & 13 for specific places you can open an investment account and begin investing.

Not getting educated on investment basics earlier.

  • Investing is like anything else, it can be learned.

  • You don’t have to get your CFP certification, you just need to understand the basics and start applying what you know to your investment plan.

  • Check out our investment episodes (2 sets of investment episodes). 

    • Ep 11-14

    • Ep 92-97

  • Spend2 (2 hours per week - 17 minutes per day) - Harry Stout: resources to become educated in the area of personal finances. financialverse.com

Not investing based on a long-term plan

  • Investing based on emotions instead of a plan.

  • Not having an investment philosophy will cause you to sell at the wrong time and cause you to buy investments based on peer pressure instead of wisdom.

  • Not living on a budget where you know how much you actually have left at the end of each month to invest in your future.

  • If you don’t have an emergency fund, then you will constantly have to pull your investments out of the market when there is a problem and it will ruin your investing.



Overinvesting in a single stock

  • Many wealthy and profitable companies have gone out of business, remember Enron? 

  • You can’t completely wreck your investing plan if you spread out your investment into multiple investments.

  • Ecclesiastes 11:2 “ Divide your investments among many places for you do not know what risks might lie ahead.”

  • Diversifying is spreading the risk across multiple categories. The best way to do this is by buying Mutual Funds or Exchange Traded Funds (ETF).

Over investing in an employer stock

“Our biggest mistake was saving for a down payment on a house by investing in the stock of the company my wife worked for. We were in our mid-20s, no kids, and were living off of my salary. She was working for a telecom company and was able to buy their stock at a 15% discount. So we did, putting most of her salary into it, and in a couple of years we had $85,000 ‘saved’ to put toward a house. About a year later, the stock was worth only $15,000! It still hurts to think about that.”

How much company stock is too much?

  • There is no hard-and-fast rule because individual situations can vary widely. However, a general guideline is to limit your investment in any single stock (your company or otherwise) to 5%-10% of your total investable assets.

  • Given that you already have so many of your financial eggs in your employer’s basket, the lower end of that range is probably appropriate when dealing with your company’s stock.

Last Three Common Investing Mistakes

  • Over delegating the responsibility of managing their investments.

  • Investing in “opportunities” with unusually high rates of returns.

  • Trying to time the market.

Resources

Sound Mind Investing - Website
Debt tools and other free resources - https://leosabo.com/resources
Online Budget Course - https://courses.leosabo.com/
David’s website - www.stewardshippastors.com