Tuesday, May 9, 2017

My Top 3 Investing Mistakes

There are only few things in life that I consider myself an expert in, but when it comes to making investing mistakes I have earned several PhDs. We all have regrets when it comes to investing. If there were a place to go to get a do-over, we would all go there. However, there are some mistakes I never made because I saw others live the mistake before I made it. Here are three mistakes I have made, that maybe someone else can learn from...

My Top 3 Investing Mistakes


1. Waiting Too Long Before Starting To Invest

Time is the investors most powerful tool. With time a multitude of mistakes can be overcome and fortunes can be built. If you do not begin investing until your 30's, 40's or 50's then there is less room for mistakes. I have always saved, but I wish that I began to aggressively invest when I was in my teens. You can start investing early, quit and still retire a multi-millionaire (see Passing The Torch).

2. Focusing On Current Yield and Not Future Yield on Cost

As noted in "5 Lessons Learned About Investing ", I erroneously focused on current dividend yield when I first started dividend investing. I was fortunate enough to accidentally buy some good dividend stocks and hold them long enough to figure out the "secret" of dividend investing. Dividend growth investing is about future yield on cost, not current yield. It is not necessarily starting with a high-yield investment, but ending up with a high-yield investment. This usually occurs by buying investments with a moderate yield, a history of growing dividends and letting time do its job (see #1 above).

3. Not Doing Your Homework Before Buying a Company

Quantitative analysis is easy - just download the numbers and crunch them. Qualitative analysis takes time and can't be automated. Getting to know a company is like getting to know a person - they are all unique and will likely require you doing something different to gain a full understanding of the company. As a former-growth investor, I lived by my stock screens to generate a buy list. I was buying a symbol to be flipped when it hit a predefined target. Sometimes you may get a quantitative yes, but after some additional analysis effort it could turn out to be a qualitative no.

That's it for me. What are your top three investing mistakes?

Full Disclosure: No position in the aforementioned securities. See a list of all my Dividend Growth Portfolio holdings here.

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