Tuesday, April 15, 2008

Top 3 Investing Mistakes

The Dividend Guy started the whole top 3 investing mistakes thing. I am finally getting around to throwing my 3 mistakes into the mix. Luckily I haven't made too many mistakes as i was lucky to read about some of the common mistakes others have made and learn from them. So without further ado, here they are:

1. Investing in my RRSP - You're probably thinking what the?? I'm sure there will be some people that totally disagree with me here. Let me explain. My strategy is to invest in dividend paying companies and then live off those dividends. If I am investing in an RRSP, it has to be converted by the age of 71. If I convert it to an RRIF then I have to draw down on my capital every year. I forget the formula and percentages, but it is significant. I want to have control in how my money is spent and managed, and investing outside of an RRSP provides that best. Like I said, i just want to live off the dividends, not draw down on my capital.

2. Not Starting Sooner - If only I had started sooner! If i had started investing at the age of 20 instead of almost age 30 i would be in much better shape. Granted, I didn't have much money to invest at age 20. If only i had understood the powerful concept of compounding over time. It is a crime that this stuff is not taught in schools!

3. Investing in Bonds - Bonds barely stay ahead of inflation. If you want to hamper your wealth creation, then buy bonds. Now, when I am close to retirement i might shift some of my portfolio into bonds (within my RRSP at least). I am young and my risk tolerance is such that i have no business owning bonds. I own a bond ETF and i will be selling out of it soon. See this article as to why bonds are a bad deal.

What are your top 3 investing mistakes?

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