Retirement Planning Mistake #8

Over confident and lacks patience.

Over confidence and lack of patience manifests itself in a number of ways. If you think you can beat the market by picking individual stocks, be very careful.  If you want to test your skills, set up two portfolios.  Use a passive approach with one and build it along the lines of portfolios shown here on the ITA Wealth Management blog.  Then set up an all-stock portfolio.  Compare the performance of each using the TLH spreadsheet.  Are you smarter than the market?  Another model to test is one of the momentum models found within The Feynman Study.

Lack of patience will show up if one tires of saving on a regular basis.  Don’t make this mistake.  If you are trading more than a few times a year, back off and let the market do its work.  Set up a portfolio with the thought in mind that the market will be closed for at least the next five years.  Could you walk away from your portfolio and go on a five-year vacation?  If not, why not?

One of my ten big mistakes is lack of education on the part of investors.  Be patient and read books highly recommended on this site.  Reading and study takes patience and time.  It will serve you well so get at it.  Begin by reading one book from my recommended list.  Bernstein, Bogle, Ferri, Swedroe, and Gibson are some of my favorite authors.  More on this later.

Work to correct mistakes such as: low savings rate, living too high on the hog, active vs. passive investing, lack of diversification, poor portfolio plan, too much debt, etc.  Most of us have plenty of issues to work on and none of us come clean on all these mistakes.  Apply patience and don’t get over confident.  As they say, “Don’t confuse brains with a bull market.”