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Hurricanes, Hit-And-Runs, & Other Investment Misfortunes Thumbnail

Hurricanes, Hit-And-Runs, & Other Investment Misfortunes

Nobody wants to make mistakes. And yet, we’re human; mistakes happen. Mistakes are part of life. So, here’s how to minimize the investment mistakes that matter the most, and make the most of the ones that remain.

Bad Decisions vs. Bad Outcomes

First, let’s define what we’re talking about: 

Mistakes happen when you make bad decisions, regardless of whether the outcome is good or bad. 

Bad decisions are the ones a rational actor would not make.

For example, within the world of investing, mistakes include: 

  • Failing to spread your risks around:
    Concentrating in too few securities, instead of diversifying across many, and many types of investments. 

  • Confusing speculating with investing:
    Chasing or fleeing hot trends instead of structuring your total portfolio to capture expected growth over time. 

  • Taking on too much or too little investment risk for your circumstances:
    Investing too conservatively or too aggressively.  

  • Overlooking fees and taxes:
    Spending more than necessary to participate in expected long-term growth. 

  • Succumbing to harmful behavioral biases:
    Acting on gut feel over rational resolve. 

These common investment mistakes share a recurring theme:

By making wise decisions about that which you can control, you can best prepare for that which you cannot. 

Damage Control

Consider insurance as an analogy with similar controllable choices and random risks. 

From hurricanes to hit-and-runs, misfortunes happen. They are not your fault; they are not your mistake. But you insure against them anyway since they can still generate a substantial loss.

You also do all you can to minimize your “at fault” errors. You don’t drive recklessly. You keep your vehicle in safe repair. You observe traffic laws. None of these sound decisions guarantee success, but they appreciably increase the odds you’ll remain accident-free. 

As an investor, you can take a similar approach:

You also do all you can to minimize your “at fault” errors. You don’t invest recklessly. You keep your portfolio in safe repair by rebalancing periodically to your targeted cruising speed. You observe tax laws.

None of these sound decisions guarantees success, but they appreciably increase the odds you’ll remain accident-free and improve your odds for happy outcomes, all while softening the blow when misfortune strikes.

The Upside of Making Investing Mistakes

As just about any successful person will tell you, the path to success is paved with errors. The same can be said about investing. The occasional misguided decision may even be good for you as an investor—especially if it’s made when the stakes are smaller and time is on your side. 

“I’ve failed over and over and over again in my life. And that is why I succeed.” — Michael Jordan

Admittedly, if you made an investment that didn’t pay off as you hoped for, it may be hard to know just what went wrong. Was it you, the whims of chance, or both? 

The point is, if you’ve made investment mistakes in the past, don’t beat yourself up over them, or make more mistakes trying to “fix” the past (such as deciding you’ll never invest again after being burned). Often, your best move is to identify which investment mistakes were involved, embrace the lessons learned, and give yourself permission to move on. 

A Helping Hand

Among our chief roles as an advisor is to help you sort out investment errors from random misfortunes, so you can move forward with greater resolve. Sometimes, this means adjusting your portfolio to reflect evolving personal financial intentions or targets. Often, it means convincing you to stay the course with your already-solid plan. Either way, your future is not yet written. 

It’s also worth noting that even if you make all the right decisions for all the right reasons, random misfortune can still strike. For instance, during hurricane season, many people will continue to encounter the equivalent of a hurricane hit-and-run. They can benefit from a helping hand right now. Consider Charity Navigator's Give Now page of highly rated charities where you can help minimize the impact of recent disasters.

Where to Give Now
Discover the most critical issues that can Benefit From a Helping Hand.

Reach out to us today if we can help you make the most of your next steps. Call us at (775) 827-0670 or schedule a Quick Connection time with us at www.openwindowFS.com/connection.