3 Financial Mistakes

Please don’t tell my kids.

Let them find out on their own…

…that I not perfect.

Sometimes I don’t know the answer, sometimes I get annoyed too quickly, sometimes I don’t take my shoes off when I walk into the house.

I know I am not perfect but I promise you that I strive to be the best I can be every day.  All of the personal mistakes I have made along the way, I think, more like hope, teach me how to be a little better.

The same is true in my investing life.

In this post I am going to share with you some of the investing mistakes I have made in an effort to help you be the best investor YOU can be.

Learn from my mistakes and experience success.    (and please don’t tell my kids about the shoes thing)

1) Bought penny stocks just because they had a low price.

Most novices think that if something is low in price it has higher growth potential.   Well a company that specialized in water purification, trading at 5 cents a share taught me a lot about volatility and those things that are low in price are typically bad businesses. And most likely won’t be around very long.  (company went bust in about 6 months)

Note-if you invest $10,000 it doesn’t matter if you bought 1 share or 100, a 5% increase is always $500.  —

Lesson learned: I should invest in companies that have a strong balance sheet regardless of share price.

2) Bought popular stocks because they went down in value and then sold them before they went back up

Do not try and catch a falling knife, it’s impossible and it hurts.   I have scars on my hands to prove it.  But in this case the scars are not actual cuts but big losses in my investment accounts instead.

Some of the most popular stocks have had huge declines in their share value. Facebook, Amazon, Netflix—companies that are currently crushing it, have had double digit declines.  I had to learn the hard way that a 5% decline is nothing… and share prices can drop by 20,30,40 even 50% before turning around.   If you buy something after it goes down 5% and you think you are a King, that euphoria quickly and I mean quickly goes away if the stock drops another 5% and it feels exponentially worse after 20%.  The pit in my stomach forced me to sell, locking in the losses.  And you know how well those stocks are doing now….

Lesson Learned: 5% volatility is nothing.  Individual stocks can drop much more than 5% very quickly and if I cannot handle that movement I should not buy those investments to begin with.

3) Sold my investments after a few months because the stock didn’t do anything

I know that may be hard to understand but when you make an investment it’s pretty normal for your imagination to run wild. (Just like when you buy a lottery ticket) What if the stock doubles or triples by tomorrow or the next day! My family will be rich!  Some companies or industries take a while to hit their growth spurt… if they hit it at all.  To maximize your investment returns you must be willing to wait/hold and allow the company to figure it out.  This is of course provided you did your research and bought the right stock to begin with.  I personally made some investments in Square (the credit card processing company) only to sell the stock about 3 months later because it made little to no movement. BAD!  2 years later it’s up 150%

Lesson Learned: Investing in companies has to mean “investing.” Traders buy and sell regularly. Investors must give their investments time to mature.  I want to be an investor not a trader.

These lessons will not make you a millionaire overnight. But they will give you insight into my own investing mistakes and if you can avoid them you’ll be on the path to financial success.

As always, you can consult with me to discuss your current portfolio.

Look for future posts on financial planning and check out my recent post on  cool money facts.

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Thanks for stopping by and I hope you achieve financial success!

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