What Investment Mistakes Should I Absolutely Avoid?

Alright, we're getting right into the listener question today.

Ralph, I've made mistakes in investing before and I'm scared of making them again.

What are the biggest traps I should avoid?

Well, you know what, that's a fantastic question because listen, all of us have made mistakes.

That's the thing about true about life, right?

We've all made mistakes.

And listen, as a little kid, you don't put your hand on the stove.

Why?

Because you got burned.

Well, so many people do the same thing with investments.

So you might be asking that same thing right now.

But let me tell you something right now, and this is a truth.

Sometimes the best investment lessons don't come from the wins.

They come from the mistakes we learn to avoid in the future.

So today I'm going to talk about those traps to avoid and how to really get past that fear and that anxiety.

This is Financially Confident Christian, your daily dose of gospel, grounded insight and faith driven tips to help you break the cycle of financial shame with confidence.

Welcome to the show, I'm Ralph.

And today we're going to build on those biggest traps to avoid when investing.

Because like I talked about when you're a little kid, I remember this.

I remember this like it was yesterday.

I was in the kitchen with my mom and I'm playing around in the kitchen.

I put my hand up on the stove, well, guess what?

I got burnt.

I remembered, hey, don't touch the stove.

Well, so many people think about investment the same way.

But my goal today is to help you grow steadily, grow wisely.

And hey, the biggest takeaway from today is how to grow with peace of mind.

Because listen, this isn't the first time I've talked about this.

I've guided clients for 30 years through market crashes.

I've seen some crashes that'll make your head shake.

I've seen booms and I've seen corrections.

And I've also seen firsthand the costly mistakes that trip people up.

Listen, I've made those mistakes myself.

And the biggest takeaway, if you want to write this down, it's the biggest takeaway for today.

Some simple wisdom can help keep you safe.

And that's exactly what I'm going to show on today's show.

And I'll forget I had this one client, client says to me, he calls me, he says, ralph, listen, I hired this great can't miss hot stock tip for you.

And I listened to him because he's a client, I'm going to pay him some mind.

But I'm thinking, this guy's crazy.

There's no way I'm going to invest in this.

But he was, hey, man, he was all into it.

They say hook, line and sinker, man, he was in that.

He was in the pond fishing.

Here's the problem.

Within months.

And I kind of knew this was going to happen, but I didn't have the heart to tell him at the time.

He nearly lost everything that he put into it.

And looking back at it, we had a conversation a couple months later.

He says, ralph, what could I have done differently?

And I said, well, let me tell you right now, those sure things, those can't miss opportunities, that's like putting your hand on the stove.

You're going to get burnt.

While a diversified portfolio would have kept them steady.

And here's a quote from Warren Buffett.

We've quoted him a couple times in this investment series, but he is right on point with this one.

He says the stock market is designed to transfer money from the active to the patient.

Yeah, that is so true.

Because when we're active, that's when we usually make mistakes.

But when we're patient, that's when we learn and we have wisdom.

Which leads me to our Bible verse today.

Let's get right into the Bible.

This is from Proverbs chapter 19, verse 2.

And this one will strike you across the forehead with a mallet.

Again, Proverbs 19:2.

Desire without knowledge is not good.

How much more will hasty feet mist away?

Let's take a minute to just unwind that a little bit.

The desire that acting out of emotion.

And listen, we're all guilty of that.

Some of my biggest mistakes in life are when I acted out of emotion.

Maybe you're feeling that same way too.

Those hasty decisions.

So how do we attain this knowledge and avoid the trap?

So let me get into my top traps with investing and I'm going to throw some stats with each one of these Trap number one, selling in fear, a very common thing as a matter of fact.

Abby, pound this statistic for today's show.

78% of Americans admit they feel uncomfortable investing and many panic sell when markets dips.

Well, here's the problem with that.

When the markets dip, you, you're locking in those losses.

You've taken the loss instead of waiting for recovery.

Abby and I were chit chatting before we talked to and I said to her do you know what that means when we talk about, you know, panic selling and locking in those losses?

She said no, I'm not really sure.

And I explained it to her.

She goes, oh wow, that makes sense.

See, if you get out of the market, when the market takes a hit and you jump out of that, guess what?

That money's lost, it's gone.

You've got no chance of recovery.

And I've seen it time and time again where if the people had just waited a couple days or maybe another month, they could have gotten some or maybe all of their money back.

So that's trap number one.

Selling in fear.

Don't sell out of fear.

Trap number two, here's another one.

Abby and I talked about this one the other day too.

Following the crowd.

You know that herd mentality.

Listen to this statistic.

About one in four investors say they reduced investing after recent market moves.

Well, guess what?

Of course they are.

They're following the crowd.

They're showing how herd mentality.

And a lot of people, hey, listen, you're standing on the street and all of a sudden a group of people comes running past you.

What do you do at them?

Like what are they doing?

And they start thinking, well, I better start running too, because everybody else is.

And the problem with that in investing is you end up buying high and selling low instead of the other way around.

So that's trap number two.

Trap number three, put in all your eggs in one basket.

And listen, if you've listened to any of this investment series, I think I've nailed this one.

But think about this.

Over 50%.

Yeah.

Half of individual investors hold concentrated portfolios.

Okay, what does that mean?

That means they're holding just a few stocks.

Or maybe they're only investing in certain industries.

That's great.

Maybe that's what they know.

But here's the problem.

When that industry has a problem, a downturn hits.

Guess what?

They're so concentrated they're going to lose big.

I've seen this with pharmaceuticals.

I've seen this with other energy stocks.

Exxon is a big one.

That had happened when there was a crash up in Alaska.

So don't put all your eggs in one basket.

Let's move on to trap number four.

And that's trying to time the market.

I call this gambling.

It's kind of like going to casino.

But think about this.

This was an interesting statistic that we found.

Missing just 10 of the best days in the market over a 20 year period.

Listen to this.

I was shocked when I read this.

Missing just 10 of the best days.

Those are the best days in a 20 year period.

Can cut your returns in half, in half just by missing ten particular days.

And see, that's the problem when people jump in and Jump out of the market all the time.

Do.

Maybe you're one of those people or maybe you know somebody that's done that.

They're jumping in and jumping out.

Makes me think of that song, jump around.

That's not a good way to invest.

That's a good way to get yourself in trouble and you're going to miss that long term opportunity.

Let's look at trap number five.

And Abby and I talked about this one too.

How many people?

My son always says this.

He says, dad, if you don't have a plan, you have a plan to fail.

So trap number five, is this investing without a plan.

Listen to this statistic.

More than 60%.

Yes, 6, 0.

60% of Americans don't have a written investment strategy.

They're putting all their money, they're putting all the things, their hard work, all the effort they're putting into something.

They have no written investment strategy.

And when you have no strategy, what does my son say?

You're gonna have a plan to fail.

And when you don't have a written investment strategy, you're far more likely to react because you don't know what you're doing.

You just let that emotion and see, that's what we're really talking about.

Big takeaway for today is it's all about emotion.

And when you live in that emotion, do you tend to repeat those mistakes when the market shifts?

So that's my three.

I'm going to review those one more time.

Let's go through those traps one more time today.

So trap number one, and that is selling in fear.

Trap number two, following the crowd.

Trap number three, putting all your eggs in one basket.

Trap number four, trying to time to market.

And trap number five, and investing without a plan.

Those are my traps for today.

If you want to be a successful long term, non emotional investor, don't get stuck in those traps.

Why about we pray together, Father, we come to you and we just ask right now for patience.

As Warren Buffett said, give us patience in the market, help us to stay steady.

Not always looking for those quick wins, those oh, I can't miss this opportunity to not live in this rushed mentality.

And we ask you to protect us from this fear driven Lord, these emotional things or even protect us from our greediness, Lord, as flesh and human beings things, we feel greed, we want to hit that mark.

We want to have those big wins, Lord, but we know that's not your will for our lives.

So we just ask you for wisdom.

Help us to invest with knowledge and not with haste, Lord.

And we ask all of this in the name of Jesus.

Amen.

All right, you ready for your one action step for today?

Let's do it.

I want you to write down one investment mistake that you've made.

Yes, we're going to do a little introspection.

So just write down one investment mistake you've made or maybe you've been tempted to make.

And here's a big part of this and one way you'll avoid it next time or don't do it.

So be honest with yourself.

This isn't about judgment.

It's about finding wisdom.

Because wisdom is the answer.

The truth is fear and greed can quietly steer your investing off course.

But you don't have to let those things win.

With patience, with clear goals and with God's guidance, you can make wise choices that truly last, that truly have a long term impact.

So I want to encourage you today, go out there and be a financially confident Christian.

Stay financially savvy.

God bless you and you have a great day today.