This year, I will have been engaged in DIY-investing for 3 full decades. Wow! It sounds like a long time, doesn’t it? Believe me when I say it went by quicker than two shakes of a lamb’s tail.
Have I made mistakes? Plenty! Did I have too much hubris along the way? Probably. Could I have made better choices if I’d had more information earlier? Absolutely.
Lesson learned – downturns are a fantastic time to be investing in the stock market.
Looking back, I see now that I could’ve made better choices. During the 2008 financial crisis, I stopped contributing to my investment accounts for 6 months. The stock market was extremely volatile, and the value of my investments was decreasing on a weekly basis. I hit “pause” on my bi-weekly contributions to my non-registered investment account. Doing so was a huge mistake!!! This was the best time to be investing my money since the stock market was on sale.
As the pandemic took hold in 2020, my investments plunged. I stopped myself from checking my balances every day once my losses hit a quarter million. To this day, I still have no idea how low my investment portfolio sank because it was too stressful for me check the number. That said, I never stopped investing. Thankfully, my employment was secure so I continued to divert money from every paycheque to my investment account.
And I stuck to my investment plan in 2022, despite the market dropping and dropping and dropping some more. Last year was definitely not an easy ride in the stock market. All the gains I’d earned in 2021 were essentially erased!!! No matter – I did not repeat the mistake of Younger Blue Lobster. I did not “hit pause” on investing this time around. This is what I’ve learned: regardless of whether the market is up or down, investing in well-diversified, equity based ETFs for long-term growth is a good thing, .
Lesson learned – start today. Procrastination simply means that your money isn’t working for you.
Procrastination hurt my financial goals. After paying off my mortgage, I waited roughly 5 years before I started to invest in my non-registered investment account. I’d been very diligent about putting money away in my RRSP every single year, so I can pat myself on the back for that choice. However, I spent too many years thinking about starting an investment portfolio instead of just starting it.
In other words, I knew what to do… but I just didn’t do it.
Please do not make this mistake. Open the account today. Set up the automatic transfer today. The sooner your money is invested, the sooner it will start producing returns for you. Believe me when I say that 30 years goes by way faster than you think it will. You don’t want Future You to live with the regret that you didn’t start as soon as possible.
Lesson learned – invest in equities while you’re young.
When I started my non-registered investment account, I chose to invest in dividend-paying mutual funds. Eventually, I switched to dividend-paying exchange traded funds because ETFs are cheaper than mutual funds. Even today, it makes no sense to me to pay more money for essentially the same product.
I was quite proud of myself! Turns out, I should have been investing in equity-based ETFs like VCN or VXC or VUN. (Yes – I’m a fan of Vanguard Canada. No – I’m not being paid for mentioning them in this post.) Investing in equities means investing for long-term growth. And long-term means 10 years or longer. Hindsight is 20/20 as my father used to say. The stock market experienced very good returns 2009 and 2020. Had I invested for growth instead of for dividend income, I would be so much closer to my financial goals by now.
In the interests of transparency, I have since adjusted my investment plan. Since October 2020, I’ve been investing in VXC. I didn’t sell my dividend ETFs – they throw off a nice annual stream of income. I allow my dividends to compound via the magic of the DRIP, aka: a dividend re-investment plan. New money goes into my equity-based ETF. God-willing, I have atleast another 10+ years to live so I’m expecting to see good returns from my equity investment.
Lesson learned – get help as soon as you can afford it.
Remember when I said that I started my investing journey 30 years ago?
Well, I didn’t see a financial planner until 2020. First of all, I wanted to see someone who wasn’t paid by the investment industry. As far as I’m concerned, there’s a conflict of interest if the person giving me advice is paid by the people whose products are being sold to me. That person’s paycheque is dependent on selling products, and is not dependent on giving me the best advice for my particular circumstances. I wanted a someone who adhered to the fee-for-service model of delivering financial planning advice. Others may feel differently, and that’s their prerogative. I would only be satisfied if I could find someone who I knew was working for me alone.
In 2019, I obtained the name of an independent financial planner. His time and advice cost me a four-figure amount, so not exactly cheap but still a very good use of my hard-earned money. The financial planner did a full review of my finances and investments. He prepared a detailed binder filled with information and projections of how long my money would last. He told me that I could retire 2-3 years earlier than I’d planned. And he didn’t try to sell me anything. In short, he didn’t have any conflict of interest because he was working for me – not for an investment company.
Should I have hired a financial planner earlier in my investing journey? Yes – probably. If I’d had the same information at the 10-year or 15-year point in my journey, then I could have course-corrected earlier.
Had I met with him at the start of my investing journey, I probably would’ve gone off-course at some point. Remember that hubris I was talking about? Well, I had it in spades! I’ve still got quite a bit but I’ve also gained the wisdom to know that there’s still a vast amount of knowledge for me to acquire. Independent financial advice at the very start of my journey might have been wasted.
Lesson learned – I need not make every mistake myself.
Mistakes are learning opportunities. No one likes to make them. For many of use, mistakes have meant that we’ve been chastised, mocked, or otherwise bullied by others for making them. As a result, we’ve learned to shy away from these teachable moments.
The possibility of making a money mistake paralyzes a lot people. As a result, they don’t ever start saving or investing. It looks like procrastination, but it’s really just good, old eternal fear. Here’s a little tip from me to you. Not every mistake has to be mine in order for me to learn from it. I’m perfectly capable of learning from other people’s mistakes… and so are you.
Look around and ask yourself if you want to make the same mistakes that you see other people making. If the answer is “No”, then make the changes you need to make so you can do better. No one can guarantee that making those changes will be easy. As a matter of fact, I’m quite certain that it will be somewhat challenging depending on how much change you decide to make. Do it in bite-size chunks. Break the task down into manageable pieces, and do one task every time you get paid or on whatever schedule you choose.
The level of difficulty associated with change you want to make should never be a reason to deter you from making it. Do not continue to make mistakes simply because it’s the easier path. That route leads to disappointment and regret. You have one life so prioritize what you want out of it. Your dreams are important to you, so you should be doing what needs to be done in order to bring them to life.