As I was cleaning up some shelves yesterday, an old copy of Kiplinger magazine fell to the floor baring the (sexy) mug of Mr. Warren Buffett himself. So naturally I had to flip through it and make sure I didn’t miss any of his nuggets of wisdom the first time around ;)
Like, say, this quote of his:
“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
ZING! Or this one – another popular Buffettism:
“Rule number one: Never lose money.
Rule number two: Don’t forget rule number one.”
There were some other gems in there too, but nothing that really actually *helps* you in the real world. Unless you’re brilliant enough to pick a part a balance sheet and/or earnings like that beautiful man is. There were, however, a set of 7 “sins” covered in another article that are always worth repeating since they DO play an active role in our weekly/monthly investing. And even better, it was written by my dear friend Kathy Kristof who you may remember from our Wallet Crashing series :)
These 7 Investing Sins are:
- Following the herd
- Giving into fear
- Hanging on too long
- Neglecting to rebalance
- Making things complicated
- Paying too much in fees
- Failing to stick to a plan
Now, I’m not the best example when it comes to investing as you’ll soon see, but here is how I’d rank myself in these fellow 7 departments. In the spirit of complete honesty ;)
Following the herd — Yes, I definitely do this. Only the “herd” these days is my mini-herd of
people bloggers who I trust and admire over the general herd out there like those in the media or Mr. Joe Schmo next door. I’ll be the first to admit that I suck at researching and figuring out this stock stuff, so when I hear this “inner circle” of people talk about the same strategy across the board (like, for example, their love of Vanguard and index investing) my ears most definitely perk up. I may not act on it right away so I can come up with my own conclusion over time, but they’re the ones I look to over the general public.
Giving into fear — I give myself an A+ on this one. Once my money’s invested it’s out of site, out of mind for me. I’ll still check in on it every now and then like when I run my monthly net worth reports, but I don’t zoom in and see what stock or fund is doing what – I just let it ride and go about my usual business. I like to do all my thinking/researching once up front and then not 2nd guess it again every other day ;) When the market goes down it’s BUY, BUY, BUY more, baby!
Hanging on too long — I’m not sure if I’ve been invested in the market long enough to be able to answer this one, but if I had to make an educated guess I’d say that I’m prone to hanging on longer than I would the opposite. Mainly, again, because of my “do your homework once and then forget about it” type mentality. For the better or the worse.
Neglecting to rebalance — Okay, now THIS one I’m horrible at. Again for all the reasons already mentioned – I don’t like thinking about this stuff once it’s invested. Now once I move all my funds into Vanguard this year it’ll help with a lot of this (I’m considering putting a bulk of my money into a few index funds), but for now it’s all over the place. I just go with the flow and add stuff to it without any care of what I already have – shame on me, I know. But it’s the truth, and I’m working on it :)
Making things complicated — One of the best moves I’ve made by far with my investments have been keeping everything under one roof (that of USAA‘s). It’ll probably move to Vanguard soon as I’ve been alluding to, but knowing that you can log into one place and see everything you need to on one screen can really do wonders. If only to be able to check on stuff routinely or make it easy on your significant other (who doesn’t handle the day-to-day money stuff). I have admittedly made things a little more complicated with my IRA Test where I divided up $180,000 to see which route would be the best (Hint: it was the one that was *not* actively managed), but that aside I like to keep my money how I do my life – simple and drama-free :)
Paying too much in fees — I probably get an F in this category as well, only I really couldn’t tell you for sure since I HAVE NO IDEA how much I actually pay! (You want to run away and stop reading this blog forever now, don’t you? ;)). I don’t know if this is because I feel like USAA is awesome and therefore don’t need to worry that much, or if I just don’t fully understand how much ittruly matters (I’m guessing it’s more of the latter?), but I’ll admit I need to focus on this more to at least get a grasp on what I’m dealing with here. And again, this will change with my switch to Vanguard since it’s all clearly labeled and easy to follow (and because my “mini-herd” of bloggers continue to rave about this organization and its fees, it’s actually harder to NOT learn about their fees than it is the opposite! Haha… which is certainly saying something ;)).
Failing to stick to a plan — Just like with the fees part, I’m not too sure if I have an actual “plan” per se when it comes to investing. Unless you count “investing as much money as possible so I can retire happily one day” an official plan ;) I can tell you that my risk levels are turned to super aggressive over conservative since I’m relatively young, and that I don’t plan on touching any of this money for quite some time, but other than that I don’t really have a “plan”- plan. Do you guys have one?
If you couldn’t tell by now, investing isn’t my strong suit ;) At least in terms of *what* my money’s being invested in. We put in anywhere from $15,000-$30,000 a year so I’m definitely doing that right, it’s just I could potentially be making more off it if I paid *closer* attention to the details – something I cringe at. I’m a follower of the 80/20 principle and once I feel I’m at 80% awesomeness, I tend to stop and move on to the next thing. It’s not like my investments haven’t been growing *at all*, ya know?
But maybe you have some pointers for me/us to consider though? Any sexy words of wisdom yourself like our good friend Mr. Buffett has? My ears are definitely open…
These are the deadly sins of investing to think about today, anyways. Courtesy, again, of Kiplinger magazine. If you’re interested in reading the entire article, and what the pros suggest you do about these (which you’ll learn more from than my crazy commentary!), you can check it out here.
If I haven’t scared you away, I’ll see you again tomorrow ;)
[Photo by freezr]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!