Podcast Episode - Suze School: The Biggest Mistakes You Make as an Investor

When you invest, do you focus more on what you lost? Are you investing all at once? Are you investing out of fear?  If you answered “yes” to any of these questions, then Suze has the rules of the road you need to avoid making the biggest mistakes you could make as an investor.

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Podcast Transcript:

Suze: August 11th, 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Suze O here, and yes, we are back. We got electricity back, having lost it after we dropped the last podcast on Sunday.

And we got electricity back approximately seven o'clock on Thursday night, and there we are. So, I look back on things and I have to tell you, we actually on some level enjoyed it. Even though it was hot, we slept outside. It wasn’t so bad. Just so you know, I actually got used to total silence. No music, no little ding, ding, dings that you have an email on my phone. No television, no air conditioning, worrying where you can hear it. No fans swirling. Nothing.

It was really incredible—dinners, just sitting down and eating and talking without maybe the television on in the back. So, we actually had a great, great time, believe it or not.

And truthfully, when I look at the stock market—it went up, went down, went down, went up. That was quite a week, wasn’t it again? But if you look at where we ended on Friday, it was almost identical to where we were in many ways a week before that.

So hopefully many of you just stayed the course. Hopefully many of you did not look on the day that was really down big and you sold out because you were afraid. And hopefully you understand that the key to successful investing is just be patient. Know that you are invested in the right areas of the stock market. Know that you are investing the correct way, which is dollar cost averaging. Know that you have time on your side where you're not gonna need to touch this money for at least five years or longer. And just have faith in what you have invested in and don't let the markets dictate you selling.

You sell when something has changed, the area is out of favor, it's going to go down, it might not come back. You sell for really good reasons, but most of the time, you just keep what you have. I hope you learned that lesson last week.

A few things that I just want to tell you before I talk about the things that I do want to talk about, which is Alliant Credit Union. Now, I had given hints that if you wanted to invest in certificates of deposit at Alliant Credit Union, and if you wanted a certificate of deposit, that is where you should invest—because they still offered the highest rate, invested in such a way where the money was safe. The highest rate for the times that they were offering it, meaning the maturity dates of the CDs.

However, on Friday, the rates did change. They went down. And just as I told you, rates were going to start to go down everywhere across the board. Not by a lot, but little by little, they will eventually go down. So the 12 to 17 month certificate that I was asking all of you—if you want to lock your money up at a great rate, please look at that one—is now at 4.75%. The 18 month certificate is at 4.40%, and the two year certificate is 4.20%, and the three year certificate now is at 4.05%.

Those are all annual percentage yields. So still great rates for the time, but don't take rates really for granted. And as I told you, what you really want to watch is that 10-year Treasury. As I mentioned last Sunday, it went down. It’s now back at about 4%, but you really want to watch that because that will tell you and dictate—as I’ve said to you over and over again—really what is happening out there.

Right now, we seem to be stable. But you just never know. So you prepare yourself and you have investments in things that make sense no matter what happens out there.

Next thing I want to talk about is our good friend Keith Fitz-Gerald. Now, I talked to Keith after our electricity and everything went on—I think it was on Friday—and we had a long, long talk. And I was like, “Keith, these markets may go down. Maybe yes, maybe no. We don’t know. But if they do go down or if certain stocks in certain areas go down, we have to take advantage of those things.”

“Keith, this is one of the best buying opportunities out there. So when are you going to be ready with this investment strategy and selections that we’ve talked about? When are you going to be ready to bring it out?” And he said to me, “I’m in my final testing grounds of it right now, Suze—probably September, most definitely by October,” assuming nothing goes wrong with his testing.

And so I just want you to know about that, and I want you to be patient for it, because one of the hardest things all of you have doing is knowing not just what to buy, but when to buy it, and how much to dollar cost average into it. All the obstacles that you find when it comes to investing, in my opinion, most likely will be solved with the concept that was created. So be patient for that, because I think it’s going to be coming soon and I think all of you are going to be surprised at what the fee for this service is going to be. I think you’ll be pleasantly surprised.

So that brings us to Suze School. Take out your notebooks.

I was thinking to myself, as many of you were sending me emails that I was able to catch up on Friday with, and I was realizing that so many of you are making serious mistakes when it comes to investing your money.

Let me tell you what I think are the biggest mistakes that you make as an investor.

Your first one, seriously, is you look at what you had, not at what you have. Write that down.

What do I mean by that? So you have a stock that you bought—maybe you bought 100 shares, maybe 10 shares, maybe 1000 shares—and you bought it at $30 a share. And now that stock is all of a sudden at $110 a share a year or two later, and you are feeling brilliant. You are feeling happy. And you are absolutely calculating how much money that stock has made you.

First of all, a stock doesn't make you money until you've sold it. OK? But now it's going down and down and now it's at $90 a share, and you're thinking to yourself, “Oh my God, I've lost money. I've lost money.”

Now you're upset because it's no longer in the $100 area. Now it's in the $90 area. What you're not thinking about is: you still have tripled your money. You bought that stock at 30. You didn't buy that stock at 100 something—you bought it at 30. So you still have a tremendous gain on your money.

So you have to look at what you have, not at what you had. You can’t look at the gains you had and think of them as losses. You need to think—as a stock that is a great stock or ETF that’s declining—you can’t look at it as a loss. You have to look at it as a gain, a gain from your original entry point into that stock or ETF.

Now, it's possible that you bought it when it was above 100 and now it’s down to 90, to 80. Now you're looking at losses there. But then chances are you made the second mistake.

And the second biggest mistake is you don’t dollar cost average. You just don’t. You take all of your investment money that you have and you buy something. And let’s say you buy it at 100. Now, all of your money is in that stock. You don’t have any more money to put in that stock. And now it’s down at 90, 80, maybe even 70. It’s a great stock, but it’s going down. You don’t have the money to now buy it as it’s going down. Biggest mistake you will ever make.

Dollar cost averaging. Because many of you ask me, “What is dollar cost averaging that Suze has always talked about?”

Let me give you an example. All of you, whether you know it or not, you are dollar cost averaging in your employer plans. Every single month when you have money taken out of your paycheck and they put it into your 401(k), 403(b), or TSP—no matter where the market is, the money is going in. And if the market's down, or if your stocks or mutual funds are down, your dollars buy more shares. If the markets are up, your dollars—because it's always the same amount every month that’s taken out—your dollars will buy less shares. But over time, your dollars that you’ve been purchasing with, the price has been averaged over time. And so has the amount of shares that you’ve been purchasing.

So let me give you an example. There’s two people. The very first person has $12,000 that they want to invest all at once. They love the stock, they are convinced that it's going up, and therefore they want to buy it now. So they take all $12,000 and buy this stock that’s $10 a share. So they are able to buy 1,200 shares. That’s what’s called lump sum investing—where you take a lump sum of money, you invest it in something, and that’s it. You don’t have any more money to put in it. All right.

The second person is smart, because they’ve been listening to the Women and Money podcast and they’ve been listening to me for almost 40 years now. And they’ve heard me say the number one rule of investing is dollar cost averaging. So they decide they also have $12,000 to invest. They’re going to invest it over a year. Every three months—or when it makes sense, when the stock moves up or down—they’re going to invest $3,000 at a time.

So they invest $3,000 when it's at $10 a share, and they’re able to buy 300 shares. Now, all of a sudden—this was an aggressive stock—it dropped considerably and it dropped down to $8 a share. Now they’re smart, so they take another $3,000 and they buy it at $8 a share, which allows them to buy 375 shares. Now the stock starts to turn around, and they see that it’s up at $9—maybe it’s gonna start to go up again. And here we are almost three-quarters of the way through the year at this time. So they take another $3,000 and they buy it again at $9 a share. And this time they’re buying 333 shares.

Now, here we are at the end of the year and guess what? It’s back at $10. And so they take their last $3,000 and they invest it, and they’re able to buy 300 shares.

Now over that year, as the stock went down, you saw they were able to buy more shares than when they first did it. Their first purchase, they were able to buy 300 shares. Then they bought 375, and 333, and then again 300. So after a year, they had accumulated 1,308 shares.

The first person had 1,200 shares. Remember, they had $12,000, they invested it all at once. It was at $10 a share. So they were able to buy 1,200 shares. Here we are a year later—the first person has now just broken even. They still have 1,200 shares. The stock is at 10, so their investment is back to $12,000 where they were one year ago.

The second person, by dollar cost averaging, in this example, has 1,308 shares. It’s back at $10 a share. So now their $12,000 investment is worth $13,080. They are up $1,080 above what the first person is up.

That is an example of dollar cost averaging.

So the biggest mistake, one of them, that you make is when you make an investment and you invest all the money that you have, and you don't have anything else to put in or take advantage of it when it goes down. Some of these stocks that went down dramatically this last week—hopefully you were smart enough to dollar cost average into them. So it's just something I really want you to do.

The next mistake that you make is that you are an all-or-nothing investor. For some reason, you don't feel like the concept of dollar cost averaging is something that you can do. So you either do something with all of your money or you do absolutely nothing at all.

This last week—it is possible—could have turned out to be one of the best buying opportunities out there, bar none. And so therefore, you did nothing. You did nothing.

What prevented you from taking a small amount of money—I don’t care if it was $1,000, $500, something—and just dipped your toe into some of these incredible stocks that had gone down, went down big?

You know, and I talked about this already to all of you. You all were saying, “Oh, if only I had purchased NVIDIA or XYZ or whatever it is when it was a lot lower, look how much money I could have made.” Well, guess what? These markets are giving you opportunities. But no, you’re not doing it. And why aren’t you doing it?

Because for some reason, you think you have to do something with all of your money or you just don’t do it at all. The key to successful investing is: do something with small amounts of money if you are afraid—but just keep doing it.

So you need to look at what you have, not at what you had. So don't look at stocks as to what they were—look at stocks to what they are. What are they right now? What have you in your account so that you can buy more, right?

You have to dollar cost average. You can't be an all-or-nothing investor. And you cannot let fear rule your emotions. Biggest mistake you will ever make. If you look at your portfolio or any of your stocks and you are afraid—but yet you know that they’re good quality, good management, everything is on its side, it just got obliterated for a while—go away and don’t look. OK?

Because if you come from a place of fear, I promise you, you will make the biggest mistake of your life.

And I just want to tell you a little bit of a Suze story for a second as to where did I learn about fear?

I learned about it when I was a stockbroker at Merrill Lynch back in 1980, 1981. Back then, when you’re a stockbroker, you have a book—meaning all of your clients were your “book.” Each one had one piece of paper in this book that showed me what they bought, how much they bought it at, when they sold, or whatever it may be.

So I was very much in touch with what every client I had was doing, because I had to literally make a physical entry to keep track of their buys and their sells for them. This was the day before computers.

And I started to notice that I had a group of people that always made money, and then I had another group of people that always lost money. And I wondered why that was.

Because you see, back then when you liked a stock like XYZ stock, you would call all your clients and tell them to buy it. And let's say they would buy it at $30 a share. And undoubtedly, sometimes the stocks would go straight up, but a lot of times they would go from 30 down to 25, maybe back up to 30. But a lot of times after we purchased a stock, it went down at first.

So I decided to call all the clients because I noticed that the clients that always lost money—when the stock went from, let's say, 30 to 25—they sold. They would call me and say, “Just sell the stock.”

All the clients that made money—I never heard from them. They were fine that it went down.

So when I called them, I said to them, “How did you feel when I asked you to buy the stock XYZ?” And they said to me, “I liked the idea. It made sense. And I knew in the long run we would make money.” I said, “So you felt secure about it? You weren’t afraid?” And they said, “Yeah.” I said, “OK, just wondering.”

Then I called all the people who had lost money and I asked them, “How did you feel when I asked you to buy that stock?” And they said, “Well, truthfully, Suze, I was afraid. I didn’t really want to buy it. I was afraid.” And I said, “Well, why did you buy it then?”

And they said, “Because you told us to, and we thought it was a good idea. But still, it just didn’t quite feel right.”

And then I realized—oh my God—as I looked at all the transactions of all the clients I had, those that purchased things out of fear, and then they were afraid, obviously even more when the stock went down, those were the people that always lost money. Because they were out of the stock when the stock eventually came back.

Because once you sell, you don’t go back in. You’re out.

All the people that consistently made money never sold because they weren’t afraid when they bought it.

So do you understand that one of the biggest mistakes you can make is when fear rules your emotions—in anything in your life?

So you have to be very clear in knowing why you are investing in something. And are you afraid? Like, do you even go into that investment and you're even afraid to go into that investment to begin with? If you are, don’t do it. Because I promise you, if you do it—when it goes down—you will sell at a loss, like maybe you did a week ago or on Monday or whatever it may have been. And then it skyrockets back, but you’re no longer in the stock.

So before you buy anything, you have got to ask yourself the question: how do you feel about what you’re about to do? If you have doubts, if you have fear, just don’t do it. Because once you do something, it’s already done. There’s time to do things—always. So you need to do something from a place of strength, not from a place of fear.

Did that make sense to you?

Now, I will say that those four rules of the road when it comes to investing can—honest to God—turn your losses into gains, turn you into a much, much better investor, a wiser investor, an investor that makes money versus an investor that loses money.

In summary: you are to look at what you have, not at what you had. You are to always dollar cost average. You are not to be an all-or-nothing investor. You can try things out—but as long as you feel secure about it. Just that simple, everybody.

If you just put those rules in effect, in the long run—over a year, over two, maybe over three—you will be very, very happy. Now, obviously with all of those is the knowledge that what you’re investing in is something that’s needed, that has certain elements to it. It’s something that everybody wants. So you just can’t do those rules with stocks that are not good. You do it with stocks that are.

How are you gonna know for sure what those stocks are? Chances are—I have a feeling—in a little bit, Keith Fitz-Gerald will be telling you. But in the meantime…

Colo goes on vacation today, and he was supposed to be gone for a full two weeks. But there is another storm out there coming our way. So if it gets much closer or if it looks like it’s going to be coming here—and Colo knows this—he is going to have to come back immediately, put the house away, and then we will see if we need to leave or where we go.

So hopefully Thursday, the storm will not have come yet, but KT will be joining us for another Ask KT & Suze Anything. Again, look at the rates of Alliant Credit Union. Go to myalliant.com. I still personally love the Ultimate Opportunity Savings Account. Put in $100 a month every month for 12 consecutive months. Then you get $100 at the end—and your money is making 3.10% for you. Telling you, the best deal out there. You should still take advantage of that.

And until Thursday, when KT joins us, there’s only one thing that I want you to remember when it comes to your money, and it is this:

People first. Then money. Then things. Now you stay safe and healthy. And if you do, you will be unstoppable.