How To Avoid Common Investing Mistakes

How do we avoid making really major mistakes in investing? It’s really easy for us to be haunted by past mistakes, getting off of that right path, as we just talked about. Maybe sometimes we put our money into a dud and we lose some, or we get spooked and we take profits too early, and we ended up missing out on far bigger returns. And both as a warning for the future and encouragement to get back from past failure, sometimes it’s wise for us to consider how we can avoid the pitfalls of foolish investing.
So, Shanna, in your opinion, what are some of the most common mistakes that investors make? Well, I would say one of them is acting like an investor before you’ve established a foundation. So there’s a difference between being an investor and being a saver. First, you need to be a saver.

You need to establish an emergency fund so that, you know, you want to be a long term investor. You don’t want to have to sell investments prematurely to meet a short term need. So you want to have a fund set up and dedicated for that, so that you don’t have to dip into your long term savings, especially if you’re saving for retirement and you’re under that magical retirement age of 59 and a half where you might not only be punished for, you might have to sell your investment when it’s down, but then you may also have to pay a penalty on top of that.

And you also want to make sure that you’ve established a foundation with, with the emergency fund that you’ve covered your family’s needs. If you have a family, maybe you’ve addressed some life insurance needs to provide for them in case you don’t live as long as you needed to to get your financial goals in place. Another thing that I would say is avoid MCI advice.
Seth, you might be too young to remember this. Do you remember the old company, MCI? They had a program called friends and family. It was about cell phones, and you got to add your friends and family, and you got them free.
Right. You know, taking free advice. You have to remember that you get what you pay for a lot of times.
Yeah. Especially from family. I understand that one for sure.
Family, in laws, all that stuff. Cousins, uncles. Yeah.
Yeah. So, you know, if you’re going to take advice from someone, you want to make sure that they have a really good understanding of what they’re doing. You know, they may just be, you know, acting on advice that they heard from another friend or family member.

And then, you know, how. How things happen down the grapevine sometimes. Things get twisted.

You also want to look at, you know, do, do they have a good record of success? You know, you. You don’t tend to ask somebody who’s going through a divorce for marital advice. Right? You do.
You’re probably not going to get very good advice. You know, another thing to remember, that if something sounds too good to be true, it probably is. You want to take a strategy.

You want to make a strategic plan. You want to avoid. You really want to kick the tires on some theories.
If you hear about something that just sounds too good to be true, just google the disadvantages to doing whatever you’re thinking of doing and get both sides of the story. Something else, maybe what I call junk drawer investing, not having a strategic, well thought out plan just kind of like, oh, well, I heard about this, so I’m going to throw a little bit of money at this. I’m going to try this, and, you know, I’m going to try this other thing.

And then what happens when you get to a point later in life? Maybe you’ve accumulated a lot of different types of investments, but maybe they’re not super consistent. Maybe they don’t work together, um, towards a strategic plan. So have some type of strategic plan.

Not to say that your plans can’t change, but at least have some kind of plan going forward. And then I think probably one of the biggest mistakes that investors make is not starting early enough and trying to play catch up later. So the biggest advantage that you have as an investor is time getting started early.

Even if it’s just $10 a month, you’re starting to develop a discipline that’s going to take you a long way. And you have a concept called time value of money and compounding. So getting started early gives you a great advantage over someone who may be able, may be able to invest more, but maybe they started 1015 or 20 years later than you did, Jenna, that’s really good.
You know, your comments about, you know, who you get advice from talking about the MCI, it reminded me of what the scripture talks about when it refers to, you know, how fools tend to attract fools and they listen to councils of fools. What a good reminder for us not to just look for people who sound smart, but to look for people who are actually wise.

Yeah, a good plug to listen to this show, by the way, because I think you have excellent wisdom, and it’s, it’s, it, it really is a blessing to know that you have the experience of being able to say, hey, this is what works, and this is what doesn’t work.
It’s really good. And a lot of times, it doesn’t sound super exciting. You know, it’s not the, you know, the.

The shows that are just real fast paced, and you’re talking about making all of these profits and, you know, these stocks that have moved a lot, you know, up 10% in one day. So it may not sound super exciting, but, you know, there’s a lot of experience, a lot of knowledge, a lot of wisdom that has gone into creating this strategy. It’s really good.
It also reminds me what you said about the emergency plan, too, because there’s nothing glamorous about setting up an emergency plan. The glamour is, oh, look at that. That this stock jumped 20%.
But it’s so good. It’s so wise to do that. First, have that base and then start up.
Why do we make these mistakes? What causes this? Well, I think it’s because we listen to our hearts, you know, our distinctive heart. Right. Just be you and, you know, listen to your heart and let your heart lead.

Well, I would say. I would venture to say that listening to our hearts has led us into more bad places than we may be willing to admit. You know, the Bible says that our hearts are inevitably wicked.
So we have to be aware of that. We have to be careful about that, and we have to make sure that our hearts are lined up with what the word of God says, because we can be sure that there is absolute truth, and that absolute truth is found in the word of God. So try to avoid being emotional about your investments.
And, you know, when I say emotional, I don’t think of, you know, a woman crying or something like that. What I think of being emotional is being led by either fear or greed. And we talk about that, you know, a lot.
That’s what drives the markets short term. So, you know, we don’t want to be led by greed, where we just, you know, grab onto any bit of advice that just sounds like it can, you know, make us a ton of money. We often hear so many investment stories just taken out of context.

You know, the person that invested in Apple when it was, you know, first came onto the market and Google and Amazon and, you know, all of those big companies, and we hear these big success stories. What we don’t hear about so often celebrated are the people who invested in things and lost all of their investment or, you know, who got overweighted in. In certain things, made a big bet on one particular idea that just sounded so good.
So we don’t want to be led by greed and we don’t want to be led by fear, either. You know, the. The parable of the.
Of the talents. The wicked servant said that his reason for burying his talent is because he was afraid. And so he was reprimanded by the master for that.

So, you know, scripture tells us so many times, more than 365 times in the. Scripture says, do not be afraid. So we don’t want to have fear of missing out.

We don’t want to have, you know, fear of loss. Because. And here’s the key to it.
When we really understand that everything is the Lord’s, that we don’t own anything. We’re not deceived by the title on our bank account or on our mortgage statement or on our house deed or anything like that that says it belongs to us. When we really know that nothing belongs to us and everything belongs to God, then we lose the fear of losing it.
Because how do you lose something that doesn’t belong to you in the first place? Well said. Well said. Yeah, Shanna, you know, it reminded me as you were talking, our emotions and our money are very similar in certain ways.

They’re both not evil things, but they need to be guided and used with wisdom very carefully. Cause they can become evil, definitely. You know, Shanna, what about for the person who has made a mistake and they’re feeling really down about it? How do they come back from it? How would you help someone who maybe panicked or tried to time the market or did one of the things you mentioned in the first segment, they put too much into a stock that tanked.
How would you help them? Well, it reminds me of the scripture that says that there is no condemnation in Christ. And when we come to the saving knowledge of Jesus Christ, you know, we’re sad about our past sins. We regret our past sins, you know, but we can move forward in freedom.

And I think that’s what we have to do when we make even far less consequential mistakes with investing is just as soon as we understand the error of our ways, we need to turn from it. So if that means, you know, getting rid of a company that we never should have bought in the first place, then we may need to do that. We shouldn’t feel paralyzed and staying stuck in it until it recovers, because sometimes that’s a never win proposition.
So just as soon as we realize those errors, we should turn from them and we should learn from them. You know, sometimes the Indian often used to say that he learned far more from his mistakes than he then he did from any of his successes. And so, you know, we should embrace that knowledge as well.

That’s good stuff. You know, one of those mistakes that we can make is starting too late. And I know that’s one that many of our listeners have at least wondered about.
What do you do if you’re someone who maybe has started too late? You’re in your forties, fifties, sixties. You haven’t started investing yet. You want to get started now? What’s the best maybe catch up advice that someone could take? Well, just make a good plan to do it.

Evaluate your budget. Yeah. Actually implement the plan.
Look at your budget. Find as much discretionary income as you can. Take your time.

Don’t be in a hurry. Don’t feel like you have to take extra risk because you started late to try to make up in return. You just need to, you know, adjust.
Maybe your retirement date. Maybe you need to plan on working longer than you did. Get educated.

Make sure that you understand the risk going in. Make sure that you, that you have a good plan and pray. I mean, that’s good advice for any decision that we’re facing.
Wait for the Lord’s direction to move. You have to have discernment and try your best not to get ahead of God. That’s something that I struggle with on a daily basis.

Yeah, absolutely. Shanna, what about goals? What goals should we strive for when we invest, knowing that we may make some mistakes along the way? What are some good goals for us to have? Well, one, you want to build a portfolio that you can live with. And what I mean by that is, you want to know the risks that are involved with investing.

We can never say guarantee in this industry, but one thing that I’m almost willing to guarantee is that you’ll make some mistakes. You know, you’ll pick some losers. You’ll pick some companies that don’t execute their business plan like they said they would have.

Come into some situations where it’s hard to navigate through their industry. And, you know, you have to be, be willing to address those things right away. You want to be disciplined, do what you can do, do your very best to not ever abandon your retirement plan.

Even if you come under hard times, still keep something going, even if it’s just $10 a month, because that helps you to establish and keep that, that discipline going. It’s good stuff. Shanna, I’d love to hear, maybe as a final wrap up here, if you’re comfortable.
Sharon, what’s, what’s a mistake that you made early on in your investing career? And how did you overcome it. Well, I got interested in economics and investing when I was in high school. It was very exciting to me.

So I can relate to people, no matter what age they are, when they first learn about investing, the excitement that comes with all of that. And I started to invest in stocks before I really had an emergency fund set up. And so when you’re young, a lot of things happen.

You know, you decide to move out of your parents home. You know, that takes money. You go to college, you may buy a car, you may get married.

So you want to make sure that you have a lot of money, that you’re directing a lot of your discretionary income towards those changes that are happening in your life before you start to invest. So, of course, I didn’t know about biblically responsible investing way back then. And I bought Walmart.

I bought it when it was at a high. It immediately went down. And then, you know, a year later or so, I had a need that came up and I had to sell it.

So I’ve actually made some of the mistakes that I’ve talked, that I talk about also, I would say accumulating too much debt. You know, when I was younger, in the beginning years of marriage, we accumulated too much debt on some credit cards, and we ended up cashing out some Roth accounts to pay those off. You know, as you, as you get into higher tax brackets.

I’m in a tax bracket now where I can’t put money into a Roth. You know, you can, I can convert money, but it comes with a significant cost. So, you know, accumulating debt and then getting out of it, there’s a whole time value of money that comes with when investing when you’re young.

And so I would encourage you to do your very best to not have to cash out of things that you get started in early. Good stuff, Shanna. Thank you for sharing that.

Thank you for sharing your own personal experience, too. That’s awesome. I know I blessed a lot of people.

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