My 11 Biggest Investing Mistakes – How to Avoid Them!

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My 11 Biggest Investing Mistakes - How to Avoid Them!

Everybody will make some mistakes in his life. There is no way around it. Over the years, I made many investing mistakes.

One thing that is very important with mistakes is that you learn from them. Not only should you not repeat your mistakes. But you should also improve your knowledge after you have made this mistake. You need to understand why this was a mistake and how not to do it again.

It is crucial to learn from your mistakes. And it is also essential to recognize your mistakes. There is no value in thinking you cannot make mistakes. And there is no value in ignoring them. I am not very proud of my investing mistakes. But it is better to talk about them than ignore them! And people can learn a lot from the mistakes of other people.

In this post, I will talk about my eleven biggest investing mistakes and what I could have done better. It is also the story of how I got into investing early and left very early. And finally started investing again way too late!

1. Not holding funds

The first of my investing mistakes was not to hold funds long enough.

My first attempt at investing was around 2014, when I was 25 years old. My bank contacted me at the time (Raiffeisen). They offered me a wide choice of funds. At that point, I had zero experience with investing. I did not know what to do. I decided to invest 4500 CHF in their funds.

For this, I chose three funds, one bond fund, and two stock funds. I decided mainly based on past performance. I was smart enough to select funds with some diversification and with some interesting stocks. But I had no idea what the Total Expense Ratio (TER) was. One of the funds had a 3% load fee and 1.25% TER. It is a terrible fund. I should have done more research.

The first of my investing mistakes was to get out too quickly. At first, the funds did pretty well, but then the USD dropped a lot and canceled my earnings. After some time, I decided to sell. With a minimal profit. I tried to cut my losses early. Had I waited a few years, I would have made an excellent result. I sold based on emotional reasons. I should have held my investments. One should always hold investments and never make an investment decision based on emotions.

2. Not investing early enough

This one is probably the biggest of my investing mistakes.

After my first attempt at investing, I waited a long time before investing again. In late 2015, I opened a funds account at PostFinance. I do not exactly remember what made me invest at that time. I think my bank advisor suggested it. It means I was out of the market for almost two years.

So, I started investing in PostFinance Fonds 3. Again, I chose without enough research. I chose this one because it was suggested based on my investor profile at that time. This fund has a 0.5% load fee and 1.11% TER. It is, of course, way too expensive even if PostFinance advertises it as cheap. It is relatively well diversified but is not an index. And it had a too large allocation to bonds for me (65%).

Nevertheless, it is still better than being out of the market. I should have invested again earlier instead of waiting for so long. Ideally, I should even have invested before my first attempt at 25. But nobody ever suggested it to me before that time. And except for some movies and books, I had no idea what was the stock market.

3. Ignoring the fees of funds

At some point, I started to learn that the cost of my PostFinance fund was too high. There were so many better options. First, I decided to use other funds offered by PostFinance. They have a few funds with TER below 1%. Also, several funds do not have load fees. So I started investing in these funds. I made a portfolio of 6 funds.

If I remember correctly, I had a global fund, a United States fund, an emerging markets fund, one dividend fund, a bond fund, and a technology fund. It was not a bad portfolio. But, It was a bit complicated. Later, I learned to simplify my portfolio.

The average TER of my portfolio was better now. But it was still way too high. It took me a few more months to learn about really cheap funds and Exchange Traded Funds (ETFs). At first, I researched if I could do on PostFinance. But their trading fees are outrageous.

I recommend you avoid trading on PostFinance at all costs. First, I decided to use DEGIRO. But then, I switched to Interactive Brokers once I had enough money to avoid the custody fees. When you do the math correctly, IB is cheaper than DEGIRO.

Then, I started investing mainly in the Vanguard Total World (VT) ETF. I mostly invest in Vanguard funds. From this point, I invested in low-cost funds only. With a cheap broker and cheap ETFs, this made my overall fees very low.

This mistake taught me that fees are very important. They can make a significant difference in the long-term.

4. Investing in cryptocurrencies

Another of my investing mistakes was following the crowd and buy into crypto-currencies. I started to buy some Litecoin (LTC) on Coinbase. Then, I invested in Bitcoin (BTC), and Ethereum (ETH) through an Exchange Traded Note (ETN). I was following the crowd and thinking it was dumb to miss the returns.

And of course, I invested way too late. I bought just five days before the all-time high. Fortunately, I did not invest a lot. I put around 700 EUR in Bitcoin and around 220 EUR in Ethereum.

And then, it crashed. The price went from a high of about 19K USD to a low of less than 7K. It lost more than half of its value in less than two months. I did not sell at a loss, at least. But I decided to go out of the crypto-currency gambling game. I do not think BTC has any real value, only a gambling value.  It is not a smart investment.

Moreover, there is too much volatility for my liking. I was already able to sell my Ethereum for about 30 EUR profit. But I am still holding on my BTC ETN. I am still down 45% on this investment. I am not sure I will ever be able to sell this fund for a profit. But I will at least wait until the end of the year before selling at a loss.

This experience taught me not to gamble my money. Smart investing is not gambling. And cryptocurrencies are a gamble.

5. Investing in a too complicated portfolio

One investing mistake I did was to try to be smarter than other people.

Once I realized that index investing with low-cost funds was the way I set up on design my portfolio. As a result, I ended up with a portfolio that was too complicated. I had too many funds. Several funds were not as useful as I thought. And I even chose a fund that was not what I wanted. You can read mistake #8 to find out what it was.

There are many examples of simple portfolios in personal finance blogs. Most of them are using a three-fund portfolio or even a two-fund portfolio. It is not necessarily easy to adapt for non-US investors, but it is doable. My new portfolio only has three funds.

And it could be simplified further to two funds. A simple portfolio is easier to manage and to rebalance. And it is often more efficient than a “seemingly smart” one. People are not beating the market in the long-term. Therefore, there is no point in trying!

6. Investing first, asking for advice second

This investing mistake is directly related to the previous one.

When I decided to invest in my complicated portfolio, I did not check with anybody. After I invested, I asked for comments on the portfolio. And most of the comments agreed that it was too complicated. If I had asked for advice before investing, I would have avoided investing in my complicated portfolio at all.

I think it is always a good idea to ask for advice before investing. You can ask advice on your favorite personal finance blog or on the Bogleheads forum. Ideally, you want several points of view on a decision before making it.

You should always ask for advice if you are not sure about something. I am running a finance blog, and yet I still often ask for advice from people that are more knowledgeable than me. Moreover, this can also break a bias that you have in your decisions.

Now, I think I have a much better grasp of how to design an ETF portfolio.

7. Not considering the big picture

In 2018, I decided to add 5% bonds to my investing portfolio.  My rationale was to help to rebalance my portfolio and to increase my bond allocation.

However, I did not consider the big picture. I only thought about the bond allocation of my investment portfolio. But I also have bonds in my retirement portfolios. Once I took everything into account, I realized I already had a too large allocation to bonds.

You should always consider the entire net worth when taking an allocation decision. Once I had the big picture, I saw I needed more stocks. I ended selling these two bond funds when reviewing my portfolio. Fortunately, I realized this early enough. However, it made me waste time that I could have spent doing better things.

8. Buying without enough research

This investing mistake is a bit silly of me.

I purchased Vanguard FTSE Pacific ETF and allocated 5% to it in my portfolio. My goal was to add more Chinese exposure.

However, this ETF only covers developed Asia, and for some historical reasons, China is still part of the Emerging Markets, not Developed Markets. Therefore I bought the ETF for Chinese exposure, but there is none in this ETF. I did not research enough. There is nothing wrong with this ETF. Tt just was not what I wanted. I ended up selling this fund.

While you should not make a complicated, you should still know what you are investing in. There are many options for stock market indexes. And for each of these indexes, there are also many options of funds that are tracking them. Therefore, it is essential to research these options!

9. Not considering professional bias

I work in the tech industry. And I am a big geek. I like the technology. So I decided to invest a small part of my portfolio in an Information Technology ETF. I did not consider that Tech was already present in my other investments. In my global world ETF, there is about 15% of Technology, and 6 of the top 10 holdings are technology or internet company. It is already a significant bias in Technology.

But my real mistake here is that I did not consider that my job is also a bias towards Technology. My current job is tied to the performance of the tech industry. If the Tech Industry crashes, both my job and my stocks could be at risk. It is not something we want.

You should avoid a too strong bias in the sector of your job.

10. Not choosing properly my broker

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This one is another of my investing mistakes where I did not do enough research for a choice.

When I started in ETFs, I decided to go with DEGIRO. I made a comparison with Interactive Brokers and found out that it was cheaper for me.

The biggest thing that I found was that IB would charge me 10 CHF per month until I had more than 100K on the account. It is entirely true. But I completely overestimated the time it would take me to get to this value. I should have taken it as a challenge to reach this amount faster.

The second mistake I did was to not take into account the Tiered account of Interactive Brokers. This pricing method makes it extremely cheap. In my first comparison between IB and DEGIRO, I did not account for that. I had to redo the work with the Tiered pricing. In my second and fair comparison of IB and DEGIRO, I found out that IB was cheaper!

Due to this, I had to switch from DEGIRO to IB. It took me longer than I expected. And changing to a new broker is not something I want to do again.

Do not make the same mistake I did and consider everything when you compare two services!

11. Experimenting with stock picking

The last of my investing mistakes was to experiment with stock picking.

After I read How I made 1’000’000 on the stock market, I decided to try his technique myself. I did not invest a lot at all. In total, I invested about 1000 USD with this technique.

I was quite fortunate with this mistake. Indeed, I did not lose much money. I only lost 25 USD in one month. I could have lost more if I was not lucky. I quickly realized that my passive index funds were much more successful than this experiment. The only reason I did not lose more money was that the market was very profitable this month. Instead of losing 25 USD, I could have made 20 USD with an S&P500 index.

I am not saying that people should not hold any stocks directly. But they should hold them because they think they have value. And they should hold them for the long-term. Finally, the objective should not necessarily to beat the market. And of course, this should be on some money on the side. It should not be a large part of the portfolio for most people.

Conclusion

As you can see, I did my fair share of investing mistakes over the years.

I wish I had realized this before. However, I am only 30 years old, so there is still some time to use a better strategy now. I am sure I will still make several investing mistakes in the next years. And I will let you know about them on this blog, of course. But I am now smarter than before, and I will avoid repeating the same mistakes of the past, at least.

The most important thing with investing mistakes is this. Do not repeat your mistakes. Learn from your mistakes. Making a mistake is not always a big deal. But doing it a second time is a big deal. If you learn from your mistakes, they will transform into powerful teachings.

And most of the investing mistakes I did are typical investing mistakes for beginner investors. Hopefully, you will not make the same mistakes I did.

If you liked reading about my investing mistakes, you would like reading about my budgeting mistakes.

What about you? What were your biggest investing mistakes?

Mr. The Poor Swiss

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

24 thoughts on “My 11 Biggest Investing Mistakes – How to Avoid Them!”

  1. Hahah. Some mistakes are extactly what I had make. And it’s it’s a very good advice for the investment starters.

    1. no matter the amount of advise, IMHO everyone needs to make their own mistakes.

      I did a few myself and learned from these:
      – crypto= gambling
      – timing the market= not possible
      – fees matter (a lot)

      1. Hi Zoli,

        You are absolutely right. Everybody will do mistakes. It is important to learn from them and not reproduce them.
        You’ve got some powerful lessons from your mistake!
        I know that a lot of people will still do the same errors as I. However, some of them will not be done and as such, I believe it has a purpose.

        Thanks for stopping by :)

  2. Sometimes the way we learn best is by making our own mistakes. The important thing is to learn from them and not make the same mistake twice. It sounds like you’ve done that and arrived at an investing strategy that works for you. My biggest investing mistake was not in stocks, but a venture that a family member proposed to me. I didn’t do my research and after I invested a lot of money, it turned out to be a fraud. Always research first and act second!

    1. Hi Gary,

      Yes, always research first and act second. A mistake is often a good think as long as we don’t repeat it.

      Your example is a very good one. A lot of the the time we don’t think as we much when it’s coming from the family. We simply trust too much. Sorry about your experience.

      Thanks for stopping by :)

  3. Hi Poor Swiss, I was surprised not to see any of my major investing mistakes on your list! Relying too heavily on broker recommendations and forecast in the early days was one (probably similar to your #8), but my biggest was getting over-confident after a few successful investments and taking far too much risk / concentration in one or two specific stocks.

    I’ve been investing for over 20 years now but still keep learning from new mistakes! At least they seem to be getting a little smaller over time…

    Cheers, Frankie

    1. Hi Frankie,

      Fortunately for me, I didn’t do any major investing mistake that cost me money. The cost was more in lost opportunity for me. Fortunately too, I never started with individual stocks. Even if I selected expensive funds, it’s still better than if I had selected very bad stocks.

      I’m glad your mistakes are getting smaller :) I’m far from having invested for 20 years, but I’m sure I’ll do many mistakes (and learn from them) in the coming years.

      Good luck with your investments! Thanks for stopping by.

  4. Investing can be simple or extremely complex. I have found that a simple portfolio of index funds is best for me. I do not have access to the required information to try to compete with professional investors. If I receive average market returns, I will out perform 80% of the investors who are trying to beat the market.

    1. Hi Dave,

      Once I realized my various mistakes, I now agree with you that a very simple portfolio of index funds (ETFs or mutual funds) is the best. Average market returns are what we should all trying to achieve. Minimizing the fees to get as close as possible to the market returns.

      Thanks for stopping by :)

  5. Really solid advice. I feel like most lists like this are pretty far off the mark, or they’re repeating advice that’s been run into the ground, but these were excellent.

    I feel right now the whole “Not investing early enough” hit the hardest. I feel I’d have more confidence in investing if I started earlier, which I think is pretty important.

    Found my way over here from The Fire Lane’s “Writing that Wowed Me” list. Was not disappointed. ;)

    1. Hi Elise,

      Thanks a lot :)

      If my list was excellent, it means my mistakes were excellent :P
      I’m glad you liked the post though ;)

      Yes, I really wish I would have invested earlier and kept invested!

      Thanks for stopping by :)

  6. We see biggest stocks rally in recent decade. I am really worried what is bigger risk – try to time the market, or keep investing into this bubble (?) market.

    1. Hi RJ,

      Yes, stocks are at an all-time high. However, they have been at an all-time high many times where it was still interesting to invest.

      Personally, I am keeping investing. But I understand your concerns. You may want to try more conservative allocation with bonds maybe?

      Thanks for stopping by.

  7. It’s always easier to know your mistakes in hindsight. I also made the same mistakes 1, 2, and 11. The one that’s the hardest to swallow is #2. But looking back at the last recession where I experimented with stock picking and it didn’t really generate a lot of return so I sold everything to use the fund to buy a house. After that I solely focus on paying off the house as quickly as possible. I missed the market upside which happened only years after the crash. I was scared to put my hard earned money into a tanking stock market, but of course looking back, they now appear to be a bargain!!! Well, at least I re-entered the market at some point and I’ll be better prepared for the next crash :))

    1. Hi Mama Bear,

      As you said, it’s always easier in hindsight :)
      Maybe I am doing errors right now and I will only know about them in 5 years!

      1 and 2 are probably extremely common mistakes!

      As you said, you are now better prepared for the next crash! It’s difficult to invest when the market is tanking and difficult not to sell.

      Thanks for sharing your story!

  8. Great article, I share many of the same learnings as you. I joined the workforce in 2008 and even though I had a pension fund with shares doing really well, I kept my money in cash, partly because I didn’t know a platform to invest easily and second because I thought I had to choose a stock, and that put me off.

    So it took 8 years for me to make it a habit, and not worry about short term fluctuations, I wish I had jumped in earlier as we know the returns which were missed.

    Often the most common investment or financial mistakes revolve around leverage, i know this article is a little more geared to investing but have you had learnings from being leveraged? Ever thought about leveraging to invest in etfs? I haven’t myself but interested in why one asset class like real estate is synonymous with leverage yet we would consider this dangerous in diversified share portfolios.

    Cheers

    1. Hi FrancInvesting,

      That’s a good point about not knowing a platform. Many people simply do not know that it’s easy to invest. Because I discovered some PF blogs, I didn’t know I could invest in stocks easily. This is really a part that we should be educated with I think.

      I don’t have learnings about being leveraged no. In fact, I never used any form of leverage.
      That’s a good point about the difference in leverage. People think that a mortgage (leverage) is an okay thing but margin investing (leverage as well) is not.
      I have never thought about that too much actually. I guess this has to do with what bad things can happen. When you have a mortgage, you are prepared to pay each month. When you invest with margin, you take more risks. The problem is that when you margin invest and you start losing money, it is very difficult to recover. We know that the stock market goes up and down. It takes a lot of time to recover losses with a leveraged investment.

      Thanks for stopping by!

  9. Thanks for this list – on point 9. considering professional bias, which ETF would you recommend to people working in tech to avoid overindexing? (knowing that their wage + stocks and other awards depend on tech and ETF that replicate the market also are heavily dependant on it).

    1. Hi Laura,

      I honestly would keep it simple and invest in something large like VT or VOO for the U.S.
      I think it’s important to avoid a Tech ETF or a Tech-Heavy index such as the Nasdaq. But I think the S&P500 is still fine.

      If you really want to limit Tech, you wil have to invest in sector ETFs and reduce the impact of Tech compared to the market. But this makes it too complicated. And I do not think this is worth it.

      Does that makes sense?

      Thanks for stopping by!

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