Don’t Make This Investing Mistake

Ben Felix explains why not taking enough risk can quietly cost you a huge amount of wealth over time.

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You produced a video a while ago. 10 mistakes that investors often make. Can you give us a look at two that jump out at you?

Not taking enough risk. I think that’s something that really affects a lot of people. And there’s lots of evidence that people don’t invest enough in stocks which have high expected returns.

They either don’t invest at all or they hold too much cash, they hold too much in bonds. And the long-term cost of not taking enough of the right kinds of risk is substantial. And you see that just by looking at the difference in historical and expected future returns between stocks and bonds, or stocks and cash.

And you compound that over somebody’s lifetime, uh, assuming that they’re investing some portion of their income over time. Uh, not taking the risk of owning equities implies just a massive cost in the amount of wealth that you can expect to accumulate. So I think that’s a big one, and it’s one that’s really easy not to frame as a mistake or, or see as a mistake.

Um, and definitely to, to feel as a mistake cause you don’t even realize that, that you’re doing it. And in many cases, people believe that the risk of investing in stocks is the wrong kind of risk. And I can talk more about the, the, the wrong kind of risks, which is one of the other mistakes that I had in that, uh, in that video.

Uh, but yeah, that, that’s one of my favorites from that, from that video.

I see that a lot in TFSAs. I see a lot of people get the money into the TFSA and then not invest it period, just essentially leave it in the savings account. I think sometimes because they know they can access the money as an emergency money or trip money or whatever, they tend to leave it there. And again, the the foregone returns are huge.

Yeah, there’s probably something to do with the account name too, or, because it’s called a savings account. It should be called the tax-free investment account or, uh, or something like that.