Three Subtle Investment Blunders I Vow to Avoid in 2025 and Beyond, Moving Forward
Investing can be a rollercoaster ride, especially for beginners. It's essential to accept that mistakes will happen, and instead of beating yourself up, learn from them to improve your future investing game. This post shares some of my less serious blunders from 2024 to hopefully help you avoid them in your own investing journey.
1. Failing to update my investment thesis
One of my rules is to have a solid investment thesis for every move I make. However, an investment thesis is not a one-size-fits-all idea that should remain unchanged for years. Market conditions and company strategies evolve, so it's crucial to regularly revisit and update your thesis. I learned this the hard way with Pfizer (PFE -0.72%).
My initial investment thesis for Pfizer praised its vast pharmaceutical portfolio and strong research and development abilities. However, despite Pfizer's competency in R&D, the stock had underperformed the market by 45% in the past three years. I clung to my outdated thesis until an activist investing group, Starboard Value, highlighted Pfizer's R&D and capital allocation inefficiencies, prompting me to reevaluate my stance.
2. Assuming the best outcomes would occur
Costco Wholesale (COST 2.55%) is one of my favorite investments, but when its CEO announced retirement and his successor in 2023, I mistakenly assumed things would continue smoothly without conducting any further analysis. While nothing went wrong with Costco under new management, this mistake compromised my ability to build the conviction necessary to hold the shares for the long term.
Think about it: rather than feeling scared or confused by the stock's performance, checking the details makes you a better investor. So, always perform due diligence, especially after significant changes to your investments.
3. Complacency
Apple (AAPL 0.75%) is a goliath with a promising future, but its performance has not kept pace with its reputation in the last decade. I assumed that the good times would continue forever, ignoring rising competition and slower growth. To avoid the pitfalls of complacency, it's essential to invest time and effort to evaluate a company's current performance and future potential.
Remember to regularly revisite your investment theses, base your decisions on data, and stay flexible in the ever-changing market. Research, learn from your mistakes, and continue growing as an investor.
- I found it crucial to properly allocate my finance resources when considering various investment opportunities, as mismanaged money can lead to missing out on potential growth or facing significant financial losses.
- To maximize returns, I realized the importance of diversifying my investment portfolio, investing in a range of assets such as stocks, bonds, real estate, and other financial instruments, which can help mitigate risks associated with any single investment.
