Don't Blow It Like Buffett: Investing VIPs Share Their Biggest Mistakes
One high-performing stock, like Google, makes up for many losers, he said, noting only 4% of stocks account for 100% of excess returns over Treasury bills.
Buying Into a Bubble
“When I first started trading it was the late 1990s and it was a crazy time to learn how things worked,” Carson Group Chief Market Strategist Ryan Detrick said via email. “I was simply buying all the networking names that were all the rage and I was on a ton of margin. I quickly more than doubled my money and then the bubble burst.”
“I learned that stock indeed can go lower and that margin can work both ways. Within a period of months I had lost virtually everything. It was a great lesson though. Nothing lasts forever, manias happen and it is hard to realize you are in one when it is happening, and leverage is a very dangerous thing if not done correctly.”
Too Much Employer Stock
Christine Benz, Morningstar’s director of personal finance and retirement planning, recently wrote about her five “failings” as an investor: holding too much employer stock, holding too much cash, not holding enough in bonds, being slow to make IRA contributions and not always placing investments in the most tax-advantageous accounts.
She told ThinkAdvisor in an email that she’d call out the heavy investment in employer stock.
“I already have a lot riding on my employer via my paycheck, so it doesn’t make sense to stake a chunk of our portfolio in it, too,” Benz said. “I have been working to divest of it but it is still a larger position than it ought to be.”
In her column, she said she and her husband hold more than the roughly 5% often considered a reasonable upper limit for employer stock.
Smaller Missteps
One of Benz’s colleagues, Morningstar Research Services portfolio strategist Amy Arnott, also wrote recently about her investing mistakes, listing eight missteps.
Some mistakes, like those Arnott cited, are less about investing in the wrong stock, or missing an opportunity to invest in a hot one, than about taking steps to maximize personal finances. The mistakes aren’t catastrophic, she wrote.
Arnott cited, for instance, being late to contributing to a health savings account, avoiding signing up for long-term care insurance, never establishing a Roth IRA, and deciding to pay off the mortgage early, among other issues.
She also described her portfolio as more complex than necessary, saying a few passively managed mutual funds and ETFs would probably comprise an ideal portfolio.
(Image of Warren Buffett; credit: Nati Harnik/AP)
