Top 12 Investing Mistakes

Written By: Natalie Pace

Top 12 Investing Mistakes

There are many Wall Street sayings that can help you to navigate successful investing. Below are 12 common mistakes that you want to avoid, and beneath them 12 Better Ideas.


1. Blind Faith. What’s a better idea: Be the boss of your money.

2. Fear, or Trusting Your Gut.

What’s a better idea: Wisdom.

3. Never Confuse a Bull Market With Wisdom.

What’s a better idea: Employ a time-proven strategy that works in bull and bear markets.

4. Following Analyst Recommendations.

What’s a better idea: If contrarianism was a great long-term plan, then you could just do the opposite of what the analysts say to enjoy superior returns. However, the better idea is to employ a time-proven strategy.

5. Trading on Headlines.

What’s a better idea: Silence the nonstop noise and stick to your knitting (another Wall Street saying that means to stick to your strategy and not be led astray).

6. Hot Tips.

What’s a better idea: Diversification and annual rebalancing.

7. Holding Too Much Company Stock.

What’s a better idea: Limiting the amount you hold of company stock to 10%. (Enron.)

8. Listening to the Advice of Family, Friends and Bloggers.

What’s a better idea: Grade your guru before you listen to anything she says.

9. Considering Your Broker to Be Your Friend.

What’s a better idea: Consider your broker to be your employee.

10.  Market Timing.

What’s a better idea: Proper diversification, underweighting risk, overweighting hot industries and annual rebalancing.

11. Unreasonable Expectations

What’s a better idea: Employing a system that doesn’t require you to bat 1000. 

12. Reaching for Yield.

What’s a better idea: Know what’s safe when there is too much credit risk.

And here’s a little more color on each point.

1. Blind Faith.
So many people want to just “turn it over to someone else” to handle for them, so that they can enjoy their life and worry about earning more money. That’s not how rich people think, and the results of blind faith are not good. Since 2000, if you’ve abdicated your responsibility to be the boss of your money, you’ve been riding a Wall Street rollercoaster, losing more than half every 8-10 years. It wasn’t a New Economy in 2000. (Dot Com stocks lost more than 78%). It wasn’t true that real estate prices were on a rocket ship to the moon in 2007. (Banks, brokerages and insurance companies wouldn’t be in business today if the U.S. taxpayer hadn’t bailed them out.) Today, the risk is leverage and too much debt. A lot of informed investors have moved to fee-based management. However, when stocks and bonds are in a bubble and money market fund have liquidity fees and redemption gates, even the fee-based advisor has a conflict of interest in trying to get you safe.

What’s a better idea: Be the boss of your money. Know what a healthy nest egg strategy looks like, how to adopt a Thrive Budget and time-proven tips that have worked over the last 19 years, at a time when most people are losing more than half of their nest egg every 8-10 years, and over 15 million homes went to auction.

2. Fear, or Trusting Your Gut.
Using any emotion to invest is a recipe for disaster. When you are afraid, you’ll be prompted to buy low. When you are excited, you’ll be tempted to buy high.

What’s a better idea: Wisdom. There are time-proven investment strategies (that you will not receive from a broker/salesman). There are reliable business cycles. And there are economic realities that spark inevitable macro trend movements. When things are bubblicious, you have to be more conservative. When things look like the Apocalypse, it’s probably time to start buying. This is completely counter to your intuition, which is why you need to use wisdom rather than your gut.

3. Never Confuse a Bull Market With Wisdom. If your home value or nest egg has earned gains since 2009, great! That’s not because you or your financial planner are great investors. It’s because real estate, stocks and bonds have been in a bull market, which is largely fueled by free, easy, borrowed money (which is why debt and credit risk are at all-time highs). As Warren Buffett has noted many times, corrections show who has been swimming naked. All investments can flip from green to red at any moment, zooming right past yellow before you can protect yourself.

What’s a better idea: Employ a time-proven strategy that works in bull and bear markets. Complacency is not your friend in 2019. Call 310-430-2397 to learn more about my easy-as-a-nest egg pie charts that earned gains in the last two recessions and have outperformed the bull markets in between. If you’re interested in real estate, join me for my Real Estate Master Class on April 26, 2019, and stay for the 3-day Investor Educational Retreat.

4. Following Analyst Recommendations. Researchers at the University of California and Stanford University found that, in the year 2000, the stocks most highly rated by analysts lost 31 percent for the year. Even more incredible is this finding from the study: The stocks least favored by the major analysts soared 49 percent. This study examined 40,000 stock recommendations from 213 brokerages. Now, in all fairness, this is mostly just a case of supply and demand. When analysts say, “Buy,” the brokers all buy (for their clients), and the share price goes up. When the analysts say, “Sell,” the brokers all sell, and the price drops faster than soufflé. That’s why trading on headlines is the 5th Investing Mistake. (See below.)

What’s a better idea: If contrarianism was a great long-term plan, then you could just do the opposite of what the analysts say. However, again, the better idea is to employ a time-proven strategy of keeping enough safe, of knowing what is safe when stock, bonds and real estate are in bubbles, proper diversification, avoiding the bailouts, adding in hots and annual rebalancing.

5. Trading on Headlines. If you wait for the headline, you’re late. The Feds didn’t admit we were embroiled in an economic meltdown until October of 2008, when stocks had already lost almost 40%. The same was true before 911. The NASDAQ had already lost 64% before 911 occurred.

What’s a better idea: Silence the nonstop noise and stick to your knitting (another Wall Street saying that means to stick to your strategy and not be led astray). If your plan only works if the value of your investment keeps rising, it’s a plan that’s being sold to you by a salesman with a conflict of interest.

6. Hot Tips. The most common way that people lose money is through a hot tip from a friend, a family member or their “investment advisor.”

What’s a better idea: Diversification and annual rebalancing. If you want to invest in something hot, then there is a slice of your pie for that. Never bet the farm.

7. Holding Too Much Company Stock. Many companies increase the value of their own stock by giving it out to employees. That’s free money for you, but only if you are able to turn paper stock into real cash. Enron employees held almost 60% of their retirement in Enron stock, and were unable to trade out of it before the company surprised everyone and declared bankruptcy. Enron declared bankruptcy on December 2, 2001 – the same year that Fortune named it the Most Innovative Company (for the 6th time in a row).

What’s a better idea: Limit the amount you hold of company stock to 10%. That’s part of your annual rebalancing strategy.

8. Listening to the Advice of Family, Friends and Bloggers. You wouldn’t let your gardener cut your hair. Letting unqualified novices give you financial guidance can result in an unwanted haircut of your assets.

What’s a better idea: Grade your guru before you listen to anything she says.

9. Considering Your Broker to Be Your Friend.

What’s a better idea: Consider your broker to be your employee. There should be regular meetings about strategy, reports about performance and a sober discussion about the current opportunities and challenges. You should have any questions you have answered in plain, easy to understand language and backed up with paperwork.

10.  Market Timing. Jumping all in or all out is a terrible strategy. Most people are tempted to sell everything at a market bottom, selling low and buying in when the party is raging – buying high. Even if you are a contrarian, this is the wrong plan, because there is always opportunity in every stage of the business cycle. Also, if you’re hot of the market, then it’s difficult to know the exact time to get back in. And if you’re all in, you’re praying for a Hail Mary, which succeeds only some of the time, but more often results in a turnover.

What’s a better idea: Proper diversification, underweighting risk, overweighting hot industries and annual rebalancing. A better plan for a home purchase is to understand the right neighborhood for you, to purchase something that is within your budget, to be patient about getting your home for a good price and to plan on living there for at least seven years. The days of rapid gains in real estate and the ability to buy and flip are likely behind us.

11. Unreasonable Expectations.
The higher the dividend, the higher the risk, and the higher the commission paid to the broker/salesman. Many people are lured into investments that pay a dividend, with the sales pitch that the asset is safe. Some people have an unreasonable expectation that reading a book will transform their lives.

What’s a better idea: Employing a system that doesn’t require you to bat 1000. There’s a lot of nonsense and bad information in even bestselling financial books. So, you first have to grade your guru. And then, once you know you’re dealing with a shaman instead of a showman, you’ll need to immerse yourself in training in order to start up the path to wisdom. You wouldn’t expect to learn how to play the guitar, or even fishing, in one weekend or by reading one book. Your results in investing will be in direct proportion to your commitment, real-world practice, right action and ability to be the boss of your money and know exactly where you are invested and why. Making a few mistakes is part of learning and mastering anything. Those “errors” will not be devastating if you have a good system and are part of the learning curve. Incidentally, this is why I developed The Gratitude Game: 21 days to a healthier, wealthier, more beautiful you – so that you can take things day by day, a chapter a day to be exact, and start implementing the time-proven Easy-as-a-Pie-Chart Nest Egg Strategies ® and Thrive Budget ® that I teach at my retreats and have written about in my books.


12. Reaching for Yield.

What’s a better idea: Know what’s safe when there is too much credit risk. The saying is, “Don’t reach for yield.” Or as Roy Rogers said, “I’m more concerned with the return of my money than the return on my money.” Even a 4-5% yield takes you into or very close to junk bond territory. Over 50% of investment grade companies are just one rung above junk status. GE was keeping investors interested with a high dividend. However, those who bought in lost their dividends and half of their investment. CDs are offering a very low yield. Many are not FDIC-insured. Many have penalties for early withdrawal (creating an opportunity cost). Some are tied to an index and might lose money.

Wisdom and time-proven systems are more essential now than ever. Complacency is not your friend. Real estate, stocks, debt, risk and bonds are higher than they have ever been. If you wait for the headlines on this, it will be too late to protect yourself.

If you’re serious about adopting the better ideas, your journey starts with learning The ABCs of Money that we all should have received in high school. Call 310-430-2397 to learn more about transforming your life with my time-proven, easy system. I have 3 bestselling books, life-transformational Investor Educational retreats and I’m happy to offer an unbiased second opinion on your current budgeting and investing strategy.

Article originally posted on nataliepace.com

Natalie Wynne Pace is the co-creator of the Earth Gratitude project and the author of the Amazon bestsellers The Gratitude GameThe ABCs of Money and Put Your Money Where Your Heart Is (aka You Vs. Wall Street). She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical).

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