Three investing errors
📪 The Optimal Agent Newsletter #035
Take Action:
Maximize your long-term returns by avoiding common investing errors.
Why It Matters:
The formula of making as much as you’re able, spending much less than you make, and investing the difference to generate financial freedom only works if you know when to act (and when to do nothing at all).
Below, three “action” errors to avoid when investing your savings.
How to Do It:
Don’t just do something, sit there. Once you’ve determined your asset allocation plan, invested in low-cost index funds, and are regularly dollar-cost averaging via automated contributions, there’s nearly nothing left to do — yet individual investors routinely bounce in and out of investment choices based on phantom “news,” guaranteeing below-market returns.
Reject tax-loss harvesting. Touted as a way to juice annual returns, this strategy involves selling investments with a negative return in order to reap a tax benefit. The problem? You’re selling an investment before it has decades to compound in your favor, often precisely when you should be buying additional shares.
Anti-helicopter investor. A great way to make bad choices, it’s tempting to look at your portfolio performance daily or weekly. Unfortunately, this will create the urge to stop investing when the market is down and to invest more when it’s up. Instead, check in infrequently, leave your automated contributions on autopilot, and reap the benefits of a lifetime of dollar-cost averaging.
Explore More:
Listen: O.A. Podcast Episode #35, where Patrick and I delve into Wealth Rule #6: Let compounding do its work — and lend a healthy dose of courage to anyone whose net worth isn’t growing quite as fast as they’d like.
Read: The Visual Capitalist’s infographic on the 20 Most Common Investing Mistakes
Watch: Warren Buffett’s address to the Terry School of Business at the University of Georgia
