My Dumbass Financial Moves

My Dumbass Financial Moves

I spend a lot of time on My Own Advisor sharing what’s working in my financial plan and how incremental money management changes are moving me forward towards my goals each month.

Making my savings automatic, investing in the market, holding stocks that have paid dividends for generations and killing off mortgage debt are key elements of my financial plan.  On the other hand, I’ve made some mistakes over the years that I wish to avoid repeating.  Thinking about my mistakes reminds me of this quote:

Insanity: doing the same thing over and over again and expecting different results – Albert Einstein.

By learning lessons, hopefully I’ll only make some financial mistakes once.  To help you avoid some of the money management mishaps I’ve made over the years, today’s post highlights some of my dumbass financial moves.

Buying mortgage life insurance

I held mortgage life insurance for a bit, many years ago.  I don’t recall how I got sucked into this product but I did.  I suspect I just listened to someone at the bank without doing any homework.  I think most homeowners are better off with individual life insurance instead of mortgage insurance.  I’d like to hear from some life insurance brokers on this topic.  I don’t own mortgage insurance anymore and never plan to again.

Buying penny stocks

I bought a couple of penny stock companies in my 20s, hoping they would skyrocket in value over time.  These guys never went anywhere but down.  I owned one in my account for the longest time as a reminder of the money I’ve lost on trying to cherry-pick stocks that have little to no established history of capital gains or any dividend histories.  I only invest in broad market ETFs and dividend paying stocks now.

Investing in high-priced mutual funds

In my 20s, I invested in mutual funds that charged money management fees close to 2%.  I simply didn’t know how much fund fees will eat into my investment returns.  On top of that, I had no idea that most mutual fund managers have no hope of beating their benchmark index, even after a few years let alone after many years.  I don’t invest in mutual funds anymore and never plan to again.

I’ve calculated these mistakes have cost me a few thousand dollars over the years but such is life.  I guess life wouldn’t be very interesting without making a few bonehead moves along the way.

You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you. – Walt Disney

Any financial moves you’ve learned from?  Share them in a comment below or in a tweet.  Maybe you can help others with your story.

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

32 Responses to "My Dumbass Financial Moves"

  1. lets see, some of my mistakes as of late:

    didnt read the fine print when consolidating all our acconts to questrade, only one transfer rebate per person is allowed, now out $456 in tdw transfer fees.

    bought a small pile of bns the other day IN THE WRONG ACCOUNT. Whoops. extra trading comission for the broker.

    Added new positions of CU, rci.b and bce in TFSA this year, pretty much buying at the top. Have averaged down a little, but geeze man bad timing.

    Going back to the financial crises.. sold 233 shares of BMO cost price of $30.00 / share. If held today return would be around 150% Dividend yield on cost would be like 10-12%

    Financial crises again… switched equity to bonds effectively selling low and buying high.

    Surprisingly long term returns are still around 6-7% which is better than couch potato.

    1. Yeah, extra trading commissions suck.

      CU is a great company, good call. Hold it forever and watch the dividends roll in….

      In 10 years, you won’t care what you paid for many of those stocks. Don’t sweat the small stuff.

      You sold BMO? Oh dear. Well, I’ve done similar stuff in the past…I need to write part 2 of this post 🙂 Misery has some company my friend.

    1. Maybe, but for my investing/trading habits, late 2007 was the only one I did not act upon where my numbers were telling me I should have, and I did not listen… Currently my numbers tell me we are in a solid slow up trend, but with the caveat of high volatility, which means the trader in me must shift gears and sell on some up days and buy on some of the down days to rebalance my trade account. The investor in me can still sit back though and enjoy the growing income knowing at the end of the day companies are still in grow mode. – Cheers.

  2. Biggest mistake for me was hanging on to the financial markets in late 2007. All the signs were there, and I KNEW I should move out of the market, but alas did not and followed the herd down into the hole… That said I did make a bit at the bottom, by realizing that all was not lost because I did not need to sell… All in all I think to my plan we lost 2-1/2 years worth of investments over the long run, which is not too bad. Second biggest was holding onto Mr. Eric Sprott’s words about Gold and the economy in around the same time… He is usually right, but always sucks on estimating the timing.

    We had mortgage insurance while we held our mortgage, but the caveat is we did not and do not have any other life insurance, and paid the mortgage in 5 years, so it was relatively cheap, in our opinion.

    To the MF’s I have held 2 MF’s for almost 15 years now, and yes I probably pay a premium for them, but they have done quite well over the long haul for me with no real thought – I purchased them directly from the Fund companies themselves though, so my fees are probably a little lower than others for the same funds – PH&N Dividend Income & Bissett Canadian Equity. In my opinion they are top grade.

    Overall lessons learned – Do not get greedy, trust no one with your money but yourself and get educated.


    1. Sorry to hear that Phil. I have a similar story, I’ve sold things “at the bottom” as well and I will eventually write a post about that. I can’t believe I was that stupid. I should have just held on and rode out the markets.

      Eric Sprott is a very bright guy but I don’t think he can predict the future 🙂

      Holding MF’s for 15 years is good…I mean, you are sticking to your plan. Well done. I’ve heard great things about some PH&N funds, namely their dividend income and bond fund.

      I charted the dividend income fund. $10,000 invested in 1977 would be worth over $432,000 today!

  3. I had mortgage life insurance for a while as well. I dropped it when I found out that they only do the underwriting (checking if they will grant the insurance) after you die. So, your widow or widower tries to collect on the mortgage life insurance and may be told, “I’m sorry but your spouse didn’t qualify. Here are your premiums back. You still owe us for the mortgage and the latest payment is past due.”

    1. The other thing about mortgage life insurance, the bank is the beneficiary and as you pay down your mortgage, your benefit decreases. I think those things are a scam. I hope to write about that in a few weeks.

      I wouldn’t think someone as knowledgeable as you would make many investment/money management mistakes Michael, but I guess we all have our stories don’t we? Hopefully I’ll make fewer mistakes going forward.

  4. As part of my job I organise individually underwritten insurance to replace mortgage protection insurance policies. For cover with a benefit period to age 65 (opposed to MPI’s 2.5 years) and the knowledge that your claim won’t be subject to medical history checks at time of claim makes it a more valuable product, but often the price is comparable or even less!

    1. Good point Financial Independence, re: medical history checks at time of claim. Do all mortgage protection insurance policies do this? I suspect most do but I wasn’t sure. I have a post coming up about that: mortgage insurance vs. individual insurance in a few weeks. I’m a big advocate of the latter but not the former.

      With MPI, the bank is the beneficiary. Not cool.

      1. The general rule is that if it isn’t medically underwritten upfront, there will always be a ‘no cover for pre-existing issues’ clause. Was being diagnosed with high blood pressure 5 years ago a contributing factor to a heart attack? While you would assume not, many people overestimate how good their health is. My view is that if something is going to be excluded that you should know up front before any money ever changes hands – hence personal, underwritten cover is the way to go.

        1. Was being diagnosed with high blood pressure 5 years ago a contributing factor to a heart attack? That example is a good one. I’m sure this comes up often.

          I’ve been convinced for a few years now, personal, underwritten insurance is the way to go.

          Thanks for your comment!

  5. I just sold my shares in Maple Leaf Foods. This could be my worst move ever.

    I think that Maple Leaf Foods just made a mistake selling their Rothsay division. That is my personal opinion but the McCain’s that run Maple Leaf seem to think it will be an improvement for the company.

    The shares are trading for about $3 more per share than I paid so I made money but did I sell too soon and there could have been a great profit in my future?

    1. Could be Jane but you never really know….time tells all. Is that why you sold Jane, because of their sale of that division? Were there other reasons for selling? Change in management?

      I try to avoid selling any stock on any bad news. The bad news always seems to pass. People more recently were telling me to bail on CLC. I bought a bunch around $8.50 I recall. The stock was supposed to tank until it recently got bought out by LifeLabs. Now, it will sell at $10.75 should shareholders approve the deal. You never really know, so I try to buy most stocks with the intention of never selling them.

      For the most part, when sell-offs happen, they are usually a good thing short-term since there is an infusion of cash (flow) to fund other things.

      1. Maple Leaf Foods is a huge butcher. They sold their rendering division. Rothsay makes biodiesel and gelatin and tallow. They said it was to allow other parts of the company to grow.

        Every manufacturer that uses animal products or that fries food has waste that must be disposed of in a safe environmental way.

        When a manufacturer controls many stages of the chain they have more control over expenses and profits. Maple Leaf has let several links in their chain go in the sale and I feel they may be off track.

        I made some money so it is not all bad and I will have to wait until years in the future to find out.

        I want to invest in a food manufacturer that is also the grower. Dole is the only one I can think of but there must be more. Their single serving fruit cocktails that do not require refrigeration are big sellers. Dole grows and manufactures. I would like to know if there are any Canadian companies like that.

    2. Jane:

      I think you made a good move selling MFI to benefit from the short-term enthusiasm over the divestiture. This move was made primarily to free up funds for the ongoing tranformation of the meat business – the McCain’s are betting it all on meat. Remember, last year they added a further $200 MM in debt as well for the same purpose.

      The last time I checkd the street had a 12-mo price of $12 on MFI and I believe the future benefits of the turnaround are fully priced in at $12. Also, I think that long-term consumer preferences for processed meat will be down, not up (in CA at least).

      IMO, MFI will likely be acquired in much the same way as MFD.

  6. I also bought a few penny stocks. My mistake grew bigger as my first trades were positive. I then invest more and more money into this strategy until losing 50% of my nest egg… that was going to be used as cash down payment 2 months after for my second house… not the best move ever! hahaha!

    On the other side, I’ve learned a investing lesson: never invest for greed!

  7. I had mortgage life insurance when I first bought my house, but then declined it upon renewing the mortgage. Big rip-off.

    Never bought a penny stock, but I bought some high yield stocks like YLO when I first started my portfolio (thankfully I sold that one after a few months, even for a modest profit).

    I had the high priced mutual funds when I started investing regularly. Honestly, I had no idea there were other products out there besides my banks’ funds. Where would I get that idea 😉

    I’ve blogged about some of my dumbass moves: One was getting in over my head when I bought my first home, and the other was racking up some credit card debt and having to dip into my RRSP to pay them off. Never again!

    1. Your comment about mutual funds made me laugh. Seems most DIY investors have a similar journey, away from mutuals that is.

      Getting in over your head with a mortgage is certainly not good. I know we owe too much on this home, which makes me nervous. I’d love to see our mortgage under $150,000 in another 3 years. That would make me feel much, much better.

  8. I, too, wasted $1,000.00 on penny stocks, but it taught me to focus on best-of-breed, blue chip companies with a better than average track record. I also invested, not just in high priced mutual funds, but in their even higher priced cousins – segregated funds offered by insurance companies. I now use Exchange Traded Funds, instead. I think my biggest mistake, however, was relying on too much product – emerging market funds, Brazilian funds, technology funds, etc., etc.. The TSX market is made up mostly of Financials, Energy, and Mines & Materials. With the availability, now, of inverse funds, that is all I could need.

    1. Hey Ian,

      I probably spent more than $1,000 on my penny stocks! It really sucks and ticks me off when I look back on it in my early 20s.

      Most investors are probably adequately diversified with 3-4 ETFs, a few popular ones from Vanguard, Vanguard Canada and/or iShares. Thoughts?


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