There are a lot of investing mistakes that people can make in the day-to-day or year-to-year management of their portfolios. The purpose of this blog is to talk about things I have done to avoid mistakes. I was challenged by a friend of mine recently to come up with what I thought were the top 3 investing mistakes that a person could make. The key was that it needed to be the top 3 and not the top 10 or even the top 5 – this required me to think long and hard to weed out the other bazillion investment mistakes to choose only 3. I then had the idea to cheat a bit – a way in which I could (with the help of the blogging community) come up with a much broader list of investing mistakes.
I would like to challenge other bloggers to come up with their list of the top 3 investing mistakes they believe are. This way, at the end we will hopefully have a huge list of potential mistakes that all investors can draw on to determine the best way to manage their portfolios. After presenting my own top 3, I will tag three other personal finance bloggers to create a post that presents their own top 3 list.
My Top 3 Investing Mistakes
1. Not creating and adhering to a properly structured asset allocation
The most important factor of a portfolio is the asset allocation, and the mistake is when people do not structure an asset allocation and choose to invest in a non-strategic or haphazard manner (i.e. buying a bit of this, and a bit of that).
2. Compulsively Checking Your Stock Prices
I believe this is a huge mistake that long-term investors make and the reason it is a mistake is that it leads to emotional responses. This constant monitoring in my experience has lead me to make decisions not with the facts but with my own intuition and feelings, which has burned me every time!
3. Keeping Your Investment Assets in a Savings Accounts
This seems pretty obvious, but I think it is amazing how many people only invest their money in cash as opposed to assets that have the potential for long term appreciation. A savings account does not provide any inflation protection and over time the spending power of the money in the savings account is reduced as the prices of goods and services rise.
Tag You Are It…
To keep this going, I want to tag the following three bloggers with their choices for their top 3 investing mistakes. I also challenge them to tag 3 other bloggers to see how long we can keep this going. In addition, if you would like to participate please post a comment directing us to your post with the top 3 investing mistakes – that would be awesome!
1. Mike at Four Pillars you are tagged
2. D4L at Dividends4Life you are tagged
3. CC at Canadian Capitalist you are tagged