The 7 Deadly Sins of Investing

While there is no such thing as a sure thing, avoiding the following 7 Deadly Sins made by both beginner and seasoned investors alike can drastically improve your chances of success. Because let’s face it, time is money. Don’t waste either of yours.

Sin #1: Holding Cash in a Retirement Account

The number one sin I see time and time again is holding extra cash in a retirement account instead of investing it. Studies have shown the average American has $9,700 in CASH just sitting in their retirement account. The biggest issue with this is you are getting pretty much ZERO return on interest, with the average percentage being 0.45% and top accounts accruing 0.6% interest. 

Instead of letting your money sit and doing basically nothing to protect your investment (and frankly, your future) invest in Index Funds like the Dow, S&P or Nasdaq, which have seen consistent growth of 25-30% year over year. If you don’t invest this money, not only are you leaving a TON of money on the table, but the overall value of the money you have sitting in your account is actually DECREASING. You have to keep in mind that with fluctuating inflation rates, the US dollar fluctuates as well. And with the record setting inflation we have been experiencing, the value of any cash you have sitting in your retirement account has already decreased. 



Sin #2: Individual Stock Investing

Another common mistake made by investors is only investing in individual stocks. From a statistical standpoint, 90% of companies will eventually go out of business. This includes companies that were once thought of as stable investments. For every success story such as Amazon, Apple, or Facebook there is a large, successful company such as Sears, Blockbuster, or Kodak that eventually went under due to poor management and/or becoming outdated in their service or technology. Plus, once the court orders all assets to be sold and payouts to be made, stockholders are typically the very last people to get paid when this happens - which is usually close to nothing.

Again, instead of putting all of your eggs in one basket, spread out your investments in Index Funds, ETFs or Mutual Funds where you can set it and forget it. These stocks reweigh and redistribute themselves, so they are much more reliable in terms of longevity and an all around safer investment to provide a return in your favor.  



Sin #3: Not Buying a Home as Early as Possible

In my 20+ years of being a real estate agent, I have seen this one happen time and time again. Flat out, there is no time in history where renting a home has outweighed the value of owning your own home. As an example, rent prices here in the Metro Detroit area are now averaging $1,600 per month, which translates roughly to purchasing a $300,000 home at the current interest rates and including both taxes and insurance in your mortgage payment. There are obviously additional costs to take into consideration when owning a home, such as annual maintenance costs (generally 0.5-0.75% cost of the home), but the good far outweighs any extra expenditures. 

For one, the government loves homeownership and rewards it through tax benefits. The MID (Mortgage Interest Deduction) is where the amount of annual interest you pay on a home is taken off of your income when you file your taxes each year, providing you with a tax break. Here in Metro Detroit that amount is roughly $2,200 for the average home. That in itself is more than you can expect to pay for normal maintenance on a home each year.

Also, as you make your monthly mortgage payments you are building equity. Right now, the average American is living in their home for 11 years before making their next move. In that time for the average home, you can expect to pay down $79,000, and receive $24,000 in tax write-offs for a total of $103,000 - even if property values were to stay completely stagnant for the 11 years you are in the home.

Lastly and most importantly, rent prices have been steadily increasing 3-5% on average for the past 50 years. In 2021, rent prices on average increased a staggering 14%, with rent prices here in Metro Detroit increasing 16.5%. By taking advantage of current interest rates and purchasing a home you can lock in your monthly payment for up to 30 years, thus protecting yourself and your family from increasing rent prices. 



Sin #4: Timing the Market

You’ve likely heard people talk about ‘buy low, sell high’ when speaking about the stock market. I’m here to tell you this does not work. A prime example is Warren Buffett, AKA The Oracle from Omaha. Warren has been a consistent investor for 70 years and is thought of as one of, if not THE best investor of all time. However you will not find his name on any of the top 50 lists. Warren’s biggest asset is he knows that time is on his side. He is not easily spooked when the market turns and has always held firm in riding out low prices knowing they will return to high prices. Instead, he stays consistent.

Multi-decade studies have been conducted by Bank of America, Merrill Lynch, and Charles Schwab and all show that even if you had invested on the best days, you still would have lost oney versus just staying consistent in investing steadily over time. So if you haven’t yet started investing, now is the time to do so.



Sin #5: Paying High Fees 

There is absolutely no point in paying high fees to heavily managed mutual funds and ETFs. in fact, it will drastically decrease the value of your investment over time. Instead invest in a low fee ETF,  index fund or mutual fund. 

History has shown that if you were to invest $500 per month for 40 years into a low fee mutual fund at roughly 0.5% in comparison to investing the same amount at the same frequency into a high fee mutual fund at 2%, you would nearly DOUBLE your profit. 

Breaking this down a bit, if you were to invest in a mutual fund which gains 10% value in a year, but you pay 2% in fees, that’s actually 20% of your gains! If you were to run the same investment scenario using a managed fund with a low fee of 0.5%, you would only lose 5% of your gains. As this cycle continues year after year, the compounding effect of paying out a high fee mutual fund will cost you nearly HALF of your profit over a 40 year period. 



Sin #6: Thinking Short Term

You’ve probably noticed a similar theme appearing in the above sins I’ve mentioned: TIME. Investing is a long-term process with no scheme or secret to getting rich quick. Time is a function of money and of success. Don’t fall into the FOMO (Fear Of Missing Out) thought process where you’re constantly taking your money in and out of the market to throw it at the next big thing. If you have some extra money to put into what could be a more volatile stock just to see where it goes, sure. But do not pull money from your long-term stocks with a proven track record to do so. 



Sin #7: Not Investing Soon Enough

The most common mistake I see people making is not investing soon enough. Another factor of time - the sooner you can begin investing and letting your money work for you, the sooner it can begin compounding against itself. JUST MAKE SURE YOU KEEP INVESTING. Remember, this is a long-term game. It takes years of steady and consistent investing to be successful, but your future is worth the investment. 


Everybody makes these mistakes at one point in time or another while learning about investing, but the more we are able to arm ourselves with the knowledge of what to avoid, the better we can do for ourselves and our families. And knowing is half the battle.   


- Michael Perna

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