Let’s face it we all make mistakes. We’ve made them in the past and we’ll likely make them in the future. We’re human.
On Seeking Alpha in of 2013 I bragged that I would never make another investment mistake. I probably made a few in the last several years, but most of minor concern. My biggest ‘mistake’ coming out of the financial crisis was being too defensive. Our portfolios performed quite well moving through and out of the recession thanks to adding some new monies and thanks to a modest gold position. The story on the gold is that in my advertising days one of my clients was Barrick Gold, the world’s largest gold mining company. Given that I was hanging out with gold bugs I was talked into holding a decent gold position that included Barrick stock, an ETF that held many gold companies, and an ETF that tracked the gold price.
I had accumulated in the early and mid 2000s and sold off into 2010 and 2011 after I no longer worked on the account and I realized I did not fully understand what ‘gold is’. All said, gold and precious metals is certainly known to add useful portfolio diversification. It’s an asset that can be seen as non correlated to stocks in many periods and is perhaps mostly disaster insurance. Many advisors will recommend a position in the 5-10% range of total portfolio value. I’ll leave that up to you.
I was too conservative.
My biggest mistake over the last decade or more was being too conservative after the 2008-2009 financial crisis and recession. I de-risked to a large degree, to too large a degree. Now that is a strategy that can be embraced by retirees. I penned on that on Boomer And Echo.
Now perhaps I can be forgiven somewhat for being a Scaredy Cat Investor, in 2008 I was working largely for ING Direct in the US market and I was laid off due to that financial crisis. ING Group had to be bailed out. I also felt that I had real monies to protect. The portfolios had performed well. That said, moving to a defensive posture of the area of 65% bonds and 35% stocks was too defensive. I had mostly been a very aggressive investor during my brief but ‘explosive’ accumulation stage. In the early 2010’s I thought that my freelance advertising writing days would continue, I was more in protect mode. I had no idea that I would make a career change and accept a full time position with Tangerine Investments.
Canadian home bias.
I also have to admit to a severe Canadian home bias at the time. I have adjusted that somewhat with a decent US stock position in Dividend Achievers and a few picks such as Apple and BlackRock and Berkshire Hathaway. And the good news for the portfolios is that I did stick to the plan that was laid out in the early 2010’s. All new contributions and all portfolio income was reinvested into stocks only. The portfolios developed some strong total return torque over time. The portfolios now sit in that Balanced Growth Sweet Spot.
No regrets. I had a plan, I executed to plan.
More investment mistakes.
On Twitter (you can follow me at 67Dodge) I had suggested that many investors can get away with ‘Advice Light’. Let’s face it most of us are not rich. We might struggle to just fill our registered accounts such as RRSP and TFSA. What could go wrong, right? It’s the rich folks that need advice. I was challenged on that a few times by Graeme Hughes who operates the The Money Geek blog. As an advisor Graeme had continually witnessed investors with modest assets make massive mistakes such as spending down their own RRSP monies instead of taking the government monies such as the GIS Guaranteed Income Supplement. Happy to be enlightened I invited Graeme to do a guest post on Cut The Crap Investing, and I am so glad that Graeme was up to the task. Please have a read of The 3 Most Common Mistakes of Canadian Investors.
On Twitter, the post set off a plethora of wrongdoings offered up by many of our financial planning friends. Special thanks to Alexandra Macqueen who you know from my review of Pensionize Your Nest Egg, Nicholas Hui of Vave Financial Planning and Rona Birenbaum of Caring for Clients.
Those common investment mistakes added to the list …
- Taking commuted value of pensions.
- Not understanding longevity risks.
- Spoiling children, no financial literacy.
- Focusing on returns, not cash flow.
- Hiring a bad advisor for retirement planing.
- Paying high fees.
- Improper asset allocation.
- Spending too little or too much in retirement.
- Simply not having a plan.
We could go on and we will especially on that issue of commuted pensions and copycat annuities. As we found out during that Twitterfest, many financial advisors either do not understand pension consequences, or they do not have your best interests in mind. Mistakes are made too often to the tune of hundreds of thousand of dollars. If you have an offer to commute your defined pension speak to a retirement specialist such as Alexandra.
More Weekend Reads.
I just have to share this post from eatsleepbreatheFI that details how she and her husband bought a beautiful classic muscle car – a Mustang.
What I like about this post is that it is not about denying oneself of life’s pleasures (quite the opposite) if a solid financial plan is already in motion. They turned to their financial planner Ed Rempel and received this sensible response. Well said.
From smileandconquer.com – embrace those down markets. That’s your golden ticket.
On saving and budgeting and investing and salaries I really like this post on Boomer And Echo Stop Asking $3 Questions. Start Asking $30,000 Questions.
On myownadvisor Mark looks at the Pros and Cons of Dividend Reinvestment Plans.
On FindependenceHub a financial advisor does not like those wonderful Questrade ads 🙂 and states that he’s never had a client leave because of high fees. I found some delicious irony in that as I had just helped a friend/reader leave that same firm to invest in a One Ticket Portfolio.
And on The Dividend Guy Mike helps a reader who wants to sell a third of his portfolio.
Thanks for reading. Have a great weekend. Thanks for hitting those share buttons.