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‘All Investment Mistakes Are Investor Mistakes’ Is that really true? Today we’ll dig in and see how to avoid making the most common mistakes with your investments!
Avoiding Big Mistakes with Investments
I saw that headline in an older article in The NY Times. Based on personal experience when I first started out, speaking with others on the podcast, and hearing from the community, there’s some truth to that.
I’ve gotten emails and heard from others about what they should do with their portfolios.
It’s one thing to have a plan on paper on what you’re going to do; it’s another to watch the volatility on the news or follow along on your phone and actually stick with the plan.
Whether you’re investing for retirement or another goal, I’m guessing you’re looking to get some good returns.
Today we’re looking for how you can become wiser, less stressed out investors.
In this episode, we’ll discuss:
- The biggest mistakes couples make when starting to invest
- Traps that can derail your investments
- Creating a system that works for you as a team
Let’s get started!
Resources to Stay on Top of Your Money
Here are some resources to make managing your money much easier!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Free 401(k) Analysis: blooom
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
- A Smarter Way to Think About Financial Decisions
- 401(k) Basics: Everything You Need to Know
Thank You to Our Sponsor Coastal!
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Three Mistakes to Avoid Before You Start Investing
Even before either one of you opens an account or certs contributing, there are three mistakes you should be aware of and avoid when it comes to investing. The first one is waiting for the perfect time to get started. And this can manifest in a couple of different ways. Maybe the two of you right now feel like your contribution are small enough and they're not going to have any real effects.
So why don't you just give it another year or two, when you have more money that you can contributed and invest? I understand it doesn't feel like you're making any meaningful contribution, but the good news is you don't need a lot of money to get started. One of the biggest advantages you have, even if you are starting with a smaller amount is time when we were first married and we had jobs that offered a match, we put the minimum amount to get that match and.
To be honest, it looked really small hauled those first few years. But as our income grew, our contributions grew in with the power of compound interest. Our portfolios grew as well. Another reason why you might hesitate to start contributing and investing is because you feel like maybe the timing is not right with the market.
Well past performance does not guarantee future results. If you look at the historical numbers, you're going to be better off, not trying to time the market and instead start where you are now. And then building that up. The second big mistake the couples make with investing is investing without a goal.
Typically, when we start investing it's through work and with the main account, being a 401k, we're familiar with investing for retirement. The goal has been decided for us. And the reason you want to have a goal is because then you know what your timeline is, or have a good idea of what the timeline is.
Your investments should match both. If your goal has a shorter timeline, then you're going to look for a little bit of stability and to keep that income. So instead of stocks, you might be looking at bonds, for example, So defining your goal and your timeline is crucial for your first steps with creating your investment plan, which leads us to the third mistake that couples make.
They're not sinking up with their goals and investments. Both of you need to be on board and you should have a baseline knowledge of your investment goals and what's in each of your accounts. You want to coordinate how much you're contributing and what you're contributing into. And if you have different investment styles, you have to work it out so that you're still working together on your goals.
Another consideration with couples is your timeline. Now, for example, my husband and I are about the same age. So when we're planning for retirement, we're looking to retire at the same time. But baby, there is an age gap between the two of you, a numbers wise. One of you is going to retire sooner than the other.
What does that look like? Does the other spouse continue contributing? If so, how much are they going to start winding down towards retirement with work? These are questions that you should consider and talk about. And while you may not immediately be on the same page, but with more conversations in time, you can find a solution that you're both.
How to Team Up and Invest Smarter
What if the two of you are now contributing into your accounts, whether it's for retirement or other goals? How can the two of you protect your money?
Something that's helped us in creating an investment plan and guidelines on how we're going to be investing. Having an objective plan helps us reach our goals.
But the reality is just like you, we can sometimes feel stressed out with what's going on. There are a few things that we do to make sure that we stick with our plan.
3 Key Ways to Stay on Top of Your Investments
Want a stress free way to manage your investments? Keep these three tips in mind:
- Ignore the Noise.
- Automate Your Contributions
- Regularly Check Your Investments
Ignore the Noise
The first one is ignore the noise. Whether it's through my inbox, social media, or just in the news headlines were mum boarded with people and experts just declaring the hottest stock tip or the thing we should be buying or selling.
While it may give you a false feeling that you're being proactive, actually, most of this is a lot of noise.
Some of these stories are driven to get your attention or to get ratings into eyeballs for advertisements, you can reduce a lot of stress by cutting back on the noise.
One step is being selective with your sources, choose your investment sites or other resources, very carefully.
What's the credibility of the site or show that you're watching what's their goal and how do they make money?
The examination that might lead you to weed out some shows that don't have your financial interests at heart. And to even if it looks like it's thoroughly researched, check the data yourself.
News pieces are great on focusing on maybe the narrative, a story, but it doesn't give you the whole picture.
And when it comes to investments, no one's going to care about your money as much as you do. So make sure you're comfortable understanding what this investment is, how it works, and if it fits in with your goals.
Finally have a handy place with your investment plan so you can review it as needed.
There's a reason that you picked it out. And sometimes when we hear a lot of noise, especially with something that seems like a very limited opportunity to make some money, we want to jump in and go for it, but it's better to be more objective and follow the plan.
Automate Your Contributions
Another way that you can protect your finances and investments and make sure that it is growing is by making your contributions automatic.
Like I mentioned before, it's impossible to time and predict the market. So most times it's better for you to just go ahead and have regular contact.
One of the best ways to do that is to just schedule and automate that. Treat your contributions like a bill. Your consistency is going to pay off.
If you decide to automate, you'll still be making contributions even if your day to day gets a little bit hectic, meaning that you're more likely to stick to your goals and reach them.
Have Regular Reviews
Finally, make sure you have a system for reviewing your portfolio.
Now for us, we have our monthly money dates and with it, we have a snapshot of all our accounts, including our investments.
However, when I'm talking about reviewing your portfolio this is going to be a little bit of a deeper dive.
You're going to be not only making sure that your contributions are going to the right accounts and investments that you've chosen, but you're also going to be looking at things like, are there any unnecessary fees you need to be on the lookout for?
Do you need to readjust and rebalance your investments? Or should you sit down with a financial planner to make sure that overall your big picture is looking great and that your investments are working the way they're supposed to?
Handy Tools to Track Your Investments
The good news is that there are free and paid tools out there that you can use to make sure that more of your money is going towards your goals.
One of our partners on the site blooom. They offer a free 401(k) analysis.
If you're looking at all your accounts, just to get a snapshot, one great tool that's free is Personal Capital. If you have a lot of accounts between the two of you, it makes it easy to pull it in into one spot.
If you guys have a unique situation and you'd like to have a customized solution, Tiller is another partner of ours .
They have some great tools that can pull in that information into a custom spreadsheet that you choose, or you can use one of their templates in the community.
You can again, stay on top of your money, including your investments in one easy spot. Just keep in mind when you're reviewing all your accounts on your monthly money dates with your investments.
You're not trying to tamper every time you do a money date instead, just focusing on them maybe four times a year, every quarter to make sure that the money is moving in the direction that you want it to and that you're not interfering with your investment returns!
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