My Top Investing Mistakes — and How You Can Avoid Them

I’ve been investing for years now, in the stock market, the real estate market, and crypto. I’ve also worked as a Financial Planner and seen successful investors and investors who lost wealth because of their emotions.

This post is a bit painful for me to write, but we should reflect and try to learn from our past mistakes. This applies to us as investors as well.

Looking back at my investment experiences over the years, I’ve certainly made many investing mistakes. Here are the biggest mistakes over the years.

Flipping homes vs being a landlord

In 2004, I was living in Los Angeles and befriended Carson, a real estate broker who also ran a mortgage broker company. He encouraged me to buy investment property, as I was new to the real estate market. He taught me the basics of investing in real estate.

Carson was an experienced and skilled home flipper in Los Angeles. He showed me how to locate, finance, bargain, remodel, and sell homes for profit.

Carson had been buying and flipping homes in Los Angeles for a few years at that point and was good at it. He showed me how to find properties, obtain financing, make offers, renovate homes, and then list and resell homes for a profit.

I soon bought my first condo in West L.A. I was working full-time but I spent nights researching properties and on the weekends would drive all over town to view a dozen potential homes to flip. Carson had a system, and he showed me how to find lower-priced homes in less fancy parts of the city that needed some renovation and had eager sellers. These were the properties where you could spend a few thousand to fix and resell for a profit. In those days, getting qualified for loans was easy, and banks had lenient lending standards.

I followed Carson’s strategy and flipped four properties in a year. The next year, I flipped eight properties. By 2007, I had made great profits from these short-term home flippings, but I sensed the market was changing and got nervous about its direction. I decided to stop buying and began to sell all my properties. The housing market crashed soon after.

By that time, Carson had a portfolio of over a dozen properties, but instead of selling, he chose to play the long game and continued holding on to his properties and renting them out. Being a landlord can involve a lot of time and work, but this was Carson’s trade.

Carson chose to become a landlord, but I stuck to my home-flipping mentality for quick gains. That was a costly mistake. If I had kept my properties and become a landlord, I would have made a lot more from the rent and the properties’ appreciation over the years. The difference between a long-term investing mindset and a short-term mindset can make a huge difference in building wealth.

Passing on a friend’s start-up

In 1999, a good friend launched a new startup with a few partners. Their startup would leverage the internet to provide legal documents and online legal services to the public at lower prices than traditional lawyers.

They were doing their first fundraising round and asked all their friends and family to invest. The dot-com bubble was a period of rapid growth and speculation in the Internet sector from the late 1990s to the early 2000s. This was the time when the internet was getting hot and any company with a dotcom in its name attracted investor money. For those who lived through that period, you might remember some of those companies, such as pets.com, Webvan, and eToys.com.

The dot-com bubble period was exciting because everyone believed that the internet would change business and how we communicated. His startup sounded exciting, but it also felt very risky. The internet was still in its heyday, and I didn’t understand its potential or how an unproven online legal document company would succeed. In the end, I passed on investing in his startup.

Soon after, the dot-com bubble burst and wiped out a lot of companies and investor wealth. But my friend’s startup stayed lean and survived. They were able to raise more funding and eventually began growing their online business.

Today, you’ve probably heard of or used LegalZoom, which is the leading online platform for business formation in the U.S. and has helped millions of customers since its launch.

Had I invested a few thousand dollars in LegalZoom then, I don’t know exactly how much my investment would be worth today, but it’s safe to say it would be a significant amount. Sometimes it’s investments you perceive as high-risk that can end up making the biggest difference in your portfolio.

Selling Apple in 2004

I have always been a fan of music and technology, so when I heard about the iPod, I was intrigued. The iPod was a portable music player that could store thousands of songs on a device that fit in your pocket. I bought an iPod in 2003 when the third-generation model was released. I was amazed by how easy it was to use and how great it sounded. I could sync my music library from iTunes, create playlists, and listen to my favorite songs anytime, anywhere.

The iPod was the reason I decided to buy some Apple stock in 2003. Apple was not doing very well at the time, as it faced serious competition in the personal computer market at that time, as their personal computers only had a 3% market share. I had bought the stock more as a speculative investment, not planning to hold it long-term.

I was happy to see that Apple stock performed well over the next year, and I decided to take my profits and sell them in 2004, thinking that the stock wouldn’t have more upside.

The iPhone was announced by Steve Jobs on January 9, 2007, and, as we all know, the rest is history. The iPhone was an instant hit and boosted the sales of other Apple products and services. Since then, Apple has become the most valuable and influential company in the world, and its stock price has increased over 4800% since 2003, with a market capitalization of over $2.8 trillion.

After the release of the iPhone, I could see Apple continuing to innovate and grow. Since then, I’ve bought Apple stock multiple times over the years, and it’s become one of the core positions in my portfolio. But this time, I have a long-term view.

Not Investing More in Bitcoin

The year 2017 was a historic and turbulent period for Bitcoin. That year, its price reached new highs, and its adoption and acceptance began increasing.

2017 also saw a global Bitcoin mania, as millions of people around the world became fascinated and began following the cryptocurrency trend. Bitcoin became a topic of discussion and debate in the mainstream media and on social media.

I’ve always enjoyed taking a hands-on approach to investing and have earmarked a small portion of my portfolio for high-risk investments. Bitcoin caught my attention. As I read more about its blockchain technology and its potential to transform payments, I decided to invest a small amount and just hold it.

That year, Bitcoin’s price started the year at around $1,000 and reached a peak of nearly $20,000 in December. Eventually, Bitcoin went on to reach an all-time high of around $69,000 in November 2021.

Bitcoin is a volatile cryptocurrency that can experience huge price swings in a short period. Despite its volatility, Bitcoin has been a profitable investment for me, as I’ve seen its value increase over the years.

I only invested a small amount in Bitcoin when I first bought it. Sometimes I wonder how much more my portfolio would be today if I had invested more in early 2017. But I don’t let this regret bother me too much, and I’m content with the amount I have.

Buying into the media’s FUD

I consider myself a prudent investor who follows a balanced and diversified portfolio strategy. However, I made a costly mistake at the end of 2022 when I let the media and their narrative influence my investment decisions.

The year 2022 was challenging and turbulent for the U.S. economy and the stock market. The pandemic, the inflation surge, increasing interest rate hikes, supply chain disruptions, and political uncertainty all weighed on investor’s minds.

The S&P 500 ended the year down 20%, its worst performance since 2008. Many analysts constantly appeared in the media, predicting that the U.S. would enter a recession in 2023. They pointed to data and argued that consumer spending, business confidence, and employment data all pointed to signs of weakness.

But in the back of my mind, I wondered if all the experts were wrong and that I should just stick with my investment plan.

But I allowed the financial media’s pessimism to make me fearful and doubtful. I convinced myself that I should reduce my stock exposure to protect my portfolio. I shifted from stocks to lower-risk assets, such as cash, gold, and U.S. Treasury bonds.

I thought I was being prudent and cautious, but in hindsight, the year 2023 proved me, along with many other investors, wrong. The economy and the stock market rebounded strongly from the slump of 2022 and went on to reach new highs.

In hindsight, I gave in to the pessimism that the media fed and limited the gains if I had just stayed put with my allocation.

The financial media tends to sensationalize doom and gloom, especially regarding the economy and the stock market. They know that stories that create fear, uncertainty, and doubt (FUD) can draw more eyeballs and clicks. Don’t let this influence your investment decisions. Try to ignore all the noise, stay focused, and stick to your long-term strategy.

Final thoughts

Hindsight is 20/20, and none of us can change the past. My investing mistakes have taught me some valuable lessons. I now focus more on my long-term strategy and less on short-term noise and emotions. I hope you can benefit from my experiences and avoid the same mistakes.

What about you? I'd like to hear about your investment mistakes and the lessons learned.

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