SMI on the Radio: Easily Avoidable Investing Mistakes (audio and transcript)

Aug 19, 2020

Everyone makes mistakes. It goes with being human!

Thankfully, many common investing mistakes are avoidable, as SMI executive editor Mark Biller explained earlier this week on MoneyWise Live from Moody Radio.

To listen, click the play button below. Scroll down for the transcript.

(And for more radio appearances by members of the SMI team, visit our Resources page.)

MoneyWise Live, with hosts Rob West and Steve Moore, airs daily at 4:00 p.m. ET/3:00 CT.


Steve Moore: Rob, our friend Mark Biller is executive editor at Sound Mind Investing. And if he’s made mistakes, we don’t know about them. And probably wouldn’t tell us anyway.

Rob West: Well, if he has made mistakes, I’m sure he’s learned from them. Let’s just say that. Mark, great to have you back on the program!

Mark Biller: Thanks. Good to be with you guys.

Rob West: Well, you recently asked SMI members what they thought were their most significant investing mistakes, and I’m looking forward to hearing what they had to say so we can learn from what your SMI readers were thinking about.

And so why don’t you kick us off? Tell us what was first on the list.

Mark Biller: Well, sure. Yeah, not surprisingly, you know, the biggest mistake that was mentioned by our SMI members was waiting too long to start investing. So one member wrote — a typical example here — "My first mistake was waiting 18 months to start contributing to a 401(k), which will cost me more than $300,000. By the time I retire. That probably cut the portfolio and half over a lifetime." Now that’s a very specific example. I’m sure it wouldn’t always be that dramatic, but it does illustrate the point.

Now, it’s easy to understand why failing to start sooner was one of the most frequently mentioned regrets. Most of us feel kind of strapped when we’re starting out in our careers. We don’t have a lot of extra money to invest. At least it feels that way.

Plus, you know, our good intentions to get started investing often get overcome by all the questions that pop up when a person finally does try to start — you know, where do I open an account? What do I invest in? How do I do this exactly? You know, you get stuck on these questions before you know it, another year’s gone by and you still haven’t started.

So to counter that, what we tell new SMI members is they’ve got to stop allowing this "implementation paralysis" that I was just talking about — you can’t let that for your good intentions to get going. You know, starting an investing program doesn’t have to be real difficult. You make a few fundamental decisions. You take a few easy steps and you can start successfully investing —even if your cash and your knowledge are kind of limited at the beginning. And that’s really what we’ve helped tens of thousands of people do over the last 30 years.

Rob West: Yeah, that’s exactly right. And I think that really is critical. You need to just get started in so many situations. It doesn’t have to be perfect and you can always make changes as you learn. All right, before our first break, I think we have time for one more. What’s next?

Mark Biller: Sure. Well, you just mentioned learning and ironically, the next mistake SMI members mentioned was not learning more about the basics of investing sooner. Y’know, at first glance, this kind of seems like the opposite of what I just said about just getting started, but it’s really not. If you took physics or even if you haven’t probably heard of Isaac Newton’s law of motion that "a body in motion tends to stay in motion." Well, that’s really the starting piece, what we just covered: You just have to get in motion. But once you’re in motion, those basics of investing are actually pretty easy to pick up.

Y’know, I think that people think it’s going to be hard learning about investing, so they kind of put that off. But the same way you can flip on a light switch and take advantage of the benefits of electricity without necessarily understanding exactly what’s going on, it’s much the same way with investing.

Steve Moore: And we’ll tell you how you can actually read the article that this information comes from when we return. Mark Biller with us today. 800-525-7000.

Rob West: Have you made some investing mistakes? Well, the readers of the Sound Mind Investing newsletter and website certainly have — and they were willing to share them. The question is, can you learn from them? And I’m confident you can.

Mark Biller and the team at SMI recently put a survey out to all of their readers asking for their biggest mistakes. Number one, just before the break we learned was waiting too long to start investing. How much are you giving up by waiting? The second was not learning more about investing basics sooner. And, as Mark said, in so many cases, we just need to get started. We can learn along the way.

Mark, what was mistake number three?

Mark Biller: Another one that came up frequently, Rob was investing without a personalized long-term plan. So here we heard a lot of things like, "When I started my career began to have money to invest. I didn’t have a strategy and I randomly followed tips from coworkers." And you can guess how the rest of that story typically would go.

So the lesson here is pretty simple: No matter how good your specific investing choices may be, if they’re made outside the framework of a larger plan that puts some boundaries in place and helps you manage risks, you’re really inviting trouble. Y’know, SMI is huge on developing a personalized long-term plan — we talk about that a lot on these programs — and sticking to that longterm plan. And not surprisingly, a lot of our resources on our website are devoted exactly to that topic.

Rob West: Very good. Give us the next one.

Mark Biller: Yeah. So a key part of a good investing plan, like we just talked about is knowing to get rid of an investment. So another mistake that came up a lot was not following a selling discipline. So we’d hear stories like, "I purchased one share of Apple stock in 2012, got cold feet and sold it a month later." And, of course, here we are several years later and Apple’s worth five times what it was back then! So costly a mistake there.

But you know, the key there is that they didn’t have a well-defined selling discipline. In that case they sold too soon more commonly the selling mistake is holding on too long. So we often write about how one of the keys to success in investing is having a specific and objective selling discipline so that you know exactly what has to happen to trigger a decision to sell.

Of course, then you still have to have the self-control to act when that trigger occurs, but at least you’re ahead of the people who really have no idea when they’re going to get rid of the investment that they just bought.

And, you know, this brings up an important point where really the biggest problem with getting your investing ideas from the financial media, like a lot of people do — whether that’s CNBC, The Wall Street Journal, or, y’know, a coworker, even — the problem isn’t necessarily that you’re getting bad investment ideas from those sources. It’s that you’re probably not going to have any idea when that good investment turns into a bad investment and needs to be sold. If you don’t have any followup, and those sources don’t have a way to provide you with any followup, you’re just getting a constant stream of new buying ideas.

And that’s how services like SMI really differ from a lot of other investment resources in that we’re telling people what to buy, but also — in our model portfolios — when to sell those investments and move on to something else.

Rob West: Mark, what did you hear about diversification?

Mark Biller: Yeah. So "over-investing in a single stock" came up quite a bit, Rob, as did "over-investing in their employer’s stock. "So those two are kind of tied together.

Y’know, there’s a principle that we talk about a lot that ultimately it’s impossible, we believe, to self-destruct financially if you follow God’s time-tested principles of stewardship. And one of those principles is that to protect against the uncertainties of the future, your investments should be diversified. So we talk about Ecclesiastes 11:2 (NLT) that says that real plainly: "Divide your investments among money places, for you don’t know what risks might lie ahead."

And since you don’t — and really can’t know — what the future is going to hold, you never know with certainty, which of your investments are going to turn out most profitably. And that’s the rationale for diversifying. You want to spread out that portfolio into various areas so you’re not going to be over-invested in anything that’s particularly hard hit. Now, that is doubly important when it comes to your own employer’s stock because you already have so much invested in your company’s success — your income, your health benefits, and so on. So you don’t want to layer on top of that, a huge investment in your own employer’s stock.

Rob West: Yeah. That’s great advice, Mark. We have time just to hit a few of these other ones really quickly. I know one of the things that came up was "not involving your spouse in the investing process." Why is that so important?

Mark Biller: You know, you’ve got the whole, the whole unity aspect — and I chuckle a little bit, but there’s also the very tangible "if something goes wrong" factor. If you go into it on your own and you haven’t involved your spouse — or even worse, if your spouse had apprehensions and you did it anyway — then if that goes badly, not only do you have the financial impact of that, but you’ve got the relational impact of that on the marriage.

So it’s very important to involve your spouse to have that unity, that coming together. And if you’re both in agreement on the way in, then you can handle together whatever the outcome is — whether a good outcome or a bad outcome. But you don’t want to be fractured along those lines.

Rob West: Well, especially if there’s one — and usually there is — more prone to taking risks, the other perhaps more conservative. And you might be able to talk yourself into an investment you should never be in if you’re more prone to taking risks that perhaps your spouse might caution you against.

I know another was "following the market’s impact on your portfolio daily." That certainly can be a mistake, cause you to react emotionally. And then "leaving old 401(k) accounts with previous employers." We want to get those into IRAs.

This has been so valuable, Mark. I know Steve’s going to tell our listeners how to get a copy of this article, but just want to thank you for stopping by today.

Mark Biller: Well, thanks. It’s been my pleasure.

Steve Moore: Thanks as always our pleasure as well. God bless you, Mark. The name of the article we’ve been discussing, Are You Making Any of These Common Investing Mistakes? You’ll find it available to read, without subscription, when you visit their website.

A subscription is something you might want to consider, however. It’s just a great newsletter that comes out on a monthly basis:

Written by

Joseph Slife

Joseph Slife

Joseph Slife has been a news writer for the Associated Press, a college instructor, and a radio host. He and his wife Joye have three grown sons.