Recently, I ran across a list of the “7 Deadly Investing Sins Clients Make.” The article was aimed at financial advisors, but I think regular investors would benefit from understanding the list items.

Let’s go through the “investing sins,” and I will share my thoughts.

Forgetting Arithmetic 

My newsletter subscribers manage their own investments, so I strongly suspect they have a better grasp of the investment math than those who just turn their assets over to an advisor.

However, because I focus on high-yield investments, I see investors who have trouble equating dollars with yields. We are investing to earn dollars, so being able to turn a yield into the income you earn is an important skill.

Chasing Shiny Objects

Many investors who find their way to my income-focused investment strategies do so after losing their shirts chasing the “hot” investments of the day.

Trying to find and invest in the “next hot thing” leads to disappointment. I want my subscribers to focus on the long-term strategy of investing to earn and grow a high-yield income stream. One that will last the rest of their lives.

Confusing Knowledge with Unique Knowledge

My business, offering investment information through subscription newsletters, employs advertising that may indicate we have unique knowledge. In the investment world, you can assume that all knowledge is known to all.

Understanding the longer-term aspects of investing can make you a better investor. For example, stocks have posted great returns if you look at multi-year (10+) holding periods. Dividends are cash returns that hit your account every month and every quarter.

Suspending Common Sense

Use your noggin when evaluating claims about investments and securities. If it sounds too good to be true, it probably is. 

Successful investing requires work, a workable strategy, and time.

Creating Unnecessary Complexity

I regularly hear from investors who believe they have discovered a shortcut to quicker gains or to earn more dividend income. One tactic, known as dividend capture, captures the imagination of almost every investor when first learning about high-yield investing. Dividend capture involves owning shares for just a few days to earn a dividend and then using that cash for another short-term trade to earn more dividends. It turns into a long explanation, so I will cut to the chase and tell you that dividend capture does not work. You will lose money.

Confusing Speculation with Investing

If you are investing in something you got as a tip and are hoping for a big short-term gain, you are speculating. It’s closer to gambling than investing. Real investing involves building a portfolio to employ a strategy that will work for years to build your wealth.

Buying High, Selling Low

The article linked above listed this “sin” first, but I wanted to keep it for last. Nobody knows if they are “buying high.” You buy shares of a stock because you believe it will continue to increase in value. When it turns out that you bought near the recent high, and the share price drops quickly, fear takes over, and you bail out on the stock, locking in losses. Buying high and selling low could also be described as investing driven by greed and fear.

For my income-focused subscribers, they quickly learn that you have to own shares to earn dividends, so no selling when the fear kicks in. If you beat the fear, you buy shares on sale, with even higher yields, and your wealth will increase rapidly when the markets recover.