3 crucial investing lessons I've learned the hard way

  • I’ve made a lot of mistakes with my investments, but I always try to learn something from them.
  • Due to past mistakes, I now know to pay attention to the fees on my investments and their durations.
  • I also know that it’s best to keep my long-term investments out of sight —the fluctuations upset me.
  • Read more from Personal Finance Insider.

I’ve learned most of my money lessons by making mistakes. My experience with investing is no exception. My collection of hard-won investing best practices reads like a what-not-to-do list — ranging from the obvious to the insightful.

However, discovering what the key takeaways from my investment failures are has helped me build confidence as an investor and has allowed me to buy my first home, make necessary repairs on it, and start my own business. 

1. Know the fees you’re paying on your investments

My investment journey began in earnest in 2017 after the sudden and untimely death of my husband. Like so many other areas of my life, I had a lot of learning to do — and fast. Initially, I converted all of our investments to conservative portfolios in order to safeguard the funds during a time of so much uncertainty. 

In 2018, after seeing many of my investments lose money, I began paying closer attention and asking questions about the fees I was paying. I learned that on top of substantial losses on the market, I was paying thousands in fees on my investments. 

At the time, all of my investments were actively monitored and held at one major bank. After consulting with my personal financial advisor, I landed on a new strategy that aligned more closely with my new life and single income. This new structure involved diversifying my investments to include unmonitored portfolios to save on fees, as well as moving many of my investments to Wealthsimple, which provides globally-diversified portfolios of low-cost index funds and prioritizes simple, transparent investing. 

I really like Wealthsimple because it gives the investor considerable autonomy over how their funds are managed. Switching to unmonitored investments both at my bank and with Wealthsimple helped me get ahead, even on my single salary, by saving me so much in fees.

2. Keep your long-term investments out of sight, out of mind 

An added benefit of moving the bulk of my investments to Wealthsimple was that I no longer had to see them every time I logged into my online banking. When all of my investments were held at my bank, I would see the fluctuations weekly — sometimes even daily. 

Seeing my long-term investments lose money became a major source of stress for me. It was impossible to look away — the numbers were right there on my dashboard, just below my checking account and credit card balance. It was making me feel poorer than I actually was. 

Now that my long-term investments, including the balanced and higher-risk portfolios that will naturally fluctuate along with the markets are out of sight, they can also be out of mind.

I still pop in to look at them at least once a quarter, and revisit the overall structure annually to ensure that my investments align with my changing life and goals, but not having to see them every time I log into my online banking has been a real game-changer.

This simple practice has made me more comfortable taking calculated risks to grow my investments, gently nudging me away from exclusively conservative portfolios.  

3. Don’t put money in long-term contracts when planning big life changes

Buying my first home was several years in the making. I began strategically moving funds around more than a year in advance, pulling many of my investments from the market and putting them into savings earmarked for a down payment and home repairs. The road to getting comfortable with seeing my investments dwindle as a result, was a long and winding one. Whenever I start to get panicky about the lower numbers I see in my investments and savings I remind myself that I now live in my biggest investment. I get to enjoy it every day, instead of slowly seeing abstract numbers grow on a screen. 

Where I went wrong was in putting a relatively small percentage — about 10% of my total savings and investments — into a five-year government investment contract. At the time, I knew that I would be buying a house in the next two years, but my urge to safeguard my money resulted in a knee-jerk decision when my bank suggested the inflexible fund to me. Just one year later, I’d bought my house, spent the bulk of my home fund on costly repairs and was planning a shift away from permanent full-time salaried work. 

I could really use that money now, but it’s locked away for another three years and is effectively inaccessible. True, I could draw from some of my other investments, like my retirement fund, but I’m not willing to do that. To add insult to injury, the GIC isn’t even performing! It’s moved a few cents in the last two years and I feel foolish every time I see the figures on my online banking dashboard.

Yes, that money is safe, which is what I’d wanted at the time, but it’s also not doing anything. My key takeaway from this? Think ahead, ask all your questions, and choose an investment that gives you the freedom you’ll need when the unexpected happens.