Alice Guy discusses her three biggest investing mistakes, why she didn’t start a pension in her early twenties and what she has learned about money over the years.
OK, confession time. We’ve all been there and made some investing mistakes. And the good news is that many of them come out in the wash, as long as you hold your nerve and keep investing.
As a green, wet-behind-the ears investor, I made my fair share of money mistakes in my twenties and thirties. And even as an investor writer, I don't have a crystal ball, so I’m sure there may be more to come! Here are three of my biggest investing mistakes.
1. Delaying investment
Like many young people, when I started work in my early twenties, I didn’t start a pension straight away. I had other priorities, like saving up for a house, paying for accountancy exam re-takes (yes the exams are ridiculously hard!) and more than a few holidays and handbags.
As a Gen Xer I was caught in a pension no-man’s land. Many older employees had generous defined benefit pensions, and auto-enrolment was still in the long distant future. No-one really talked about pensions, social media wasn’t invented and spending, rather than saving was majorly in fashion.
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By the time I finally got round to joining my workplace pension I was too late. In the bad old days, a company was allowed to claw back its pension contributions and pay back your contributions as a cheque if you hadn’t been in the scheme two years. That happened to me twice during my early twenties.
I reached my mid-twenties with not a penny of investment to my name, but now determined to do something about it.
2. Not diversifying
Mistake number two came along when I decided to open a private pension scheme, alongside a workplace scheme to try and play catch up.
Reading a New Year newsletter supplement, I decided to go with one of the tips for the next year and invested my whole fledgling pension fund in the Japanese market. Don’t laugh! No-one was really talking about investment at the time, and I’d never even read the much-quoted investing cliché “don’t put all your eggs in one basket”.
Well, rather predictably, the expert tip was wrong and my pension fund, thankfully only small at the time, plunged in value. Deciding to cut my losses I sold the fund and re-invested in a diversified global fund.
3. Diversifying too much
During my thirties, some investment wealth gradually building and now a qualified accountant, I crafted a hugely complex investment strategy with around 20 funds. I had a complicated spreadsheet, and my investments were spread between US, UK, Pacific, Emerging and European funds. I also invested in commodities and smaller-company funds across various geographies and had several different funds in many of the same sectors.
Over time, my investments grew well but it became increasingly difficult to make investing decisions and rebalance my portfolio. Looking back, I now realise that many of my investments probably overlapped, and I was paying unnecessarily high fees for some funds as a result.
I now aim for a much more manageable portfolio, where it’s easier to keep an eye on my investments and there’s not too much overlap.
My biggest investing wins
At the risk of counting my chickens, I did also have some big investing wins along the way. My biggest is that I did finally start a pension in my mid-twenties and managed to carry on investing pretty much throughout my twenties and thirties.
The cumulative effect of regular investing, tax relief and reinvesting my dividend income helped my small pot begin to grow. Sometimes my regular investments dropped as a career break and children got in the way, but I kept on investing whenever I could afford to.
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And my long-term strategy of investing some of my portfolio in smaller companies has paid off over time. My smaller company funds have generally outperformed the rest of my portfolio and I’ve been able to bank my profits by regularly rebalancing into my less risky funds.
Over the last year, smaller companies have generally taken a hit as nervous investors shy away from riskier investments. However, I intend to continue with this long-term strategy in the future. My portfolio is now well diversified, yet simple enough to take some calculated investment risks.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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