Don’t Make these Investing Mistakes Like I Did

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Don't make these investing mistakesJohn wrote a great post the other day about what investments you should have in your 401k.  It was really informative and made me think about a big investing mistake I made when I was first starting out.  I still consider myself a amateur investor, but I am slowly learning much more.  I have a 401k, Roth IRA, and a Scottrade investment account.  I like the idea of making money with the stock market, but I also understand the risk.  My understanding of investing has really grown since I started blogging and I am glad for it. There is so much to know when you start out with investments that it can be overwhelming for many.  I can see why some don’t ever do it. There are so many places to start that some just don’t start at all. I would say this is a bad idea, but I do understand it.  What I don’t want you to do is what I did when I first started investing. I had a 401k with my employer and ran it poorly.  Don’t make this investing mistake.

Paying Debt and Investing

I have always been a proponent for paying down debt and saving money. I consider investing part of saving money. You really only can reach retirement if you have investments.  It is still the best way to make money for retirement.  I even created a debt/saving allocation method when I was in debt. The concept for my method came from retirement investment allocations.  When you are young, your investments tend to be aggressive then turn conservative when you are older.  This is a basic method, but it makes sense.  You can do the same thing with investing.

While I was saving money and paying off my debt, I was more focused on my debt.  This wouldn’t be a problem, except I wasn’t investing to my potential I had setup my 401k and then just put it on cruise control.  My employer would add money to my 401k before my paycheck, so I never saw the money.  It was easy.  Unfortunately, easy doesn’t always mean the right way.

Ignoring Company Match

I have to admit I was really dumb when I was younger.  Being so focused on my debt and thinking my 401k was running smoothly, I didn’t think about a company match.  When I first started at the company I am currently still with, there was no company match. This means they wouldn’t match any of the funds you put into your 401k.  While I didn’t really have a problem with it, it wasn’t very competitive in our area.

I wasn’t taking much from my paycheck in order to invest.  My main focus was my debt in the beginning, so the rest could go to investing.  One day my company decided to offer a match. I said “cool!” and moved on with paying down my debt.  What I didn’t do was change my saving percentage to cap the match.  This means I was leaving free money on the table. The worst part is I left free money on the table for close to 3.5 years.  I think about it now and it really pisses me off.  How could I leave free money on the table?

You can’t get back lost returns.  Investing is all about compounding interest.  Your money earns money throughout the year and that money then earns money throughout the years to follow. Money just builds on top of money and that is how you gain money to retire.  When you don’t take advantage of company matches, then you will have to put more funds in to cover the loss returns.

Watch the Fees

John indicated this in his post.  I started thinking about my fees and remembered once issue when I had my 401k.  When I first learned that I could pick my own funds and investments, I decided to look around.  The big problem is I only focused on the average return of the funds. I didn’t look at the risk or the fees associated.  Fees can kill your returns in a second.  Luckily I didn’t move everything over to this fund as I am a fan of diversification.  What I did move over just got all of the returns eaten by management fees.  It was terrible.  While the returns were awesome, the fees were terrible.

My best advice is to always pay attention to fees.  Not only do you need to understand how much it costs you to have a fund under management, but also how much your management fee is.  There are a lot of providers for investment accounts.  Their fee structures are all different. Some are low and some are really high.  Always question the fees and understand how those fees work into your investing goals.  Paying high fees over many years can really erode your returns.

Never be afraid to invest when you are paying down debt. I think you really should be doing both.  If you do end up paying down debt and investing, then make sure you are active in the account. Don’t just set it and forget it.  Understand if your company is providing a match into your retirement account. If they are, then contribute up the the company match amount.  It is really hard to make up for lost returns.  After all of that, keep your eye on all fees you pay.  While you might not have much of an option when you are still working at the company managing the 401k, you might have options to what funds you invest in.


Are you guilty of doing any of these investment mistakes?


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  1. A lot of people are guilty of this, myself included. I still kick myself over it, but what can you do? Trying to catch up is one thing, but you’re right in that you can’t get back those lost returns. I could not agree more about investing while you’re paying off debt. I wish I would’ve done that, but I failed to. I’d say invest, at the very least, to get your company match and then the rest depends on the amount and kind of debt you have.
    John recently posted…How to Save Money on EverythingMy Profile

  2. I made these mistakes for a long time. I started getting the company match for my first job, but my company went through a merger and the company match changed. Before I only had to contribute 2% to get the company match. Then it changed so that I had to contribute 6% to get the company match… I was only contributing 2% and didn’t change it. Not only was I not contributing enough for my own savings, I wasn’t even contributing enough to get free money. Oh well, years wasted.
    Aldo @ MDN recently posted…Cool Gifts For DadMy Profile

  3. I missed out on my company’s match for the first few years I worked there. I just wasn’t that interested in saving for retirement- or maybe I thought it was too far away to worry about. I wish I would’ve started earlier but I’m glad I at least started when I did! I know many people my age (34) who still aren’t taking it seriously.
    Holly@ClubThrifty recently posted…The One Who Never Gave UpMy Profile

  4. The investment fees are always a huge factor, but sometimes I don’t think we pay enough attention to them because they just seem trivial compared to the amount you’re investing at the time. But it really is incredible to see the impact over a 10 or 20 year period – If you pay too much in fees or trade too often, your portfolio could be only half the size it otherwise would. I think you only realise and believe the size of this impact if you sit down and do a few calculations for yourself. Compound interest really is a phenomenal thing!
    Jason @ Islands of Investing recently posted…Incorporating the benefits of property into your share investment planMy Profile

  5. Great information for those who work for a company who matches your investment account–but not necessarily the best for those of us who are self-employed. Debt is similar to paying excessive fees to a company to manage your account for you–because so many people are paying HUGE percentages in credit debt, they are offsetting any gains their investments might be making. In that case, my personal experience as a self-employed person is to get rid of any high interest debt as FAST as you can. That will end up being the best INVESTMENT you could possibly make.
    Kathy @ SMART Living recently posted…From Blog To Book—The Launch of Simple-SMART & Happy!My Profile

  6. Leaving money on the table by not putting in enough to get the maximum company match is something that I tell people about EVERY SINGLE DAY. I work in HR on benefits, so I get to see this. I usually get blank stares, but eventually they catch up and then say that they just didn’t understand when they were younger.

  7. I never left money on the table, but I should have put in much more in the beginning than I did. You’re right that you can’t ever get those returns back and it’s much harder to play catch up. I’d tell any person starting out to put at least 10% into retirement. If you learn to live on what you take home, it’s much easier to avoid lifestyle inflation and maybe you won’t need to play catch up.
    Kim recently posted…Over 40 With No Retirement Savings? Here’s What To DoMy Profile

  8. Like everyone else, it took me awhile, and some big losses, to figure out that I didn’t really know anything about investing early on, and that I had to educate myself. I eventually stumbled on the diehards forum at Morningstar, and then eventually moved over to the forum. They taught me how to invest for the long term. The keys are

    1.) Don’t get suckered by sales people. (Insurance people sell insurance. Anything they tout as a good investment will likely cost you a lot in hidden fees.) You can do this yourself.
    2.) Invest as much as you can as often as you can.
    3.) Buy low-cost passive index funds or ETFs (costs matter).
    4.) Set up your asset allocation for the risk that you can handle and the risk that you need. Beware of thinking you can handle a lot of risk, when in reality, you’ll likely get scared in a 50% market drop, and sell at or near the bottom.
    5.) Diversify to decrease risk. The easiest way is to buy the Vanguard total U.S. stock market, the total international stock market, and the total bond market funds or ETFs.
    6.) Stay the course. Don’t imagine that you can time or beat the market. We are not really all above average.
    7.) Keep it simple.

    There are many other small investment nuances I have learned over the years, like i-bonds are a wonderful hedge against inflation, but the list above covers the basics of successful investing.
    Bryce @ Save and Conquer recently posted…Carnival of Retirement, June 16, 2014My Profile


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