Build On Your Missed Financial Opportunities

regretOne of the most expensive things in life is regret.  We all have missed financial opportunities that would’ve helped immensely in improving our financial situation.  I had a costly car mistake and sold too soon some of my stocks that has cost me hundreds of thousands.  Done By Forty had a post that reviewed his missed opportunity by paying off his house too soon and missing out on investment gains.  I’m a big proponent of leverage as paying my mortgage down is last on my financial priorities.  With finite funds I prioritize the following:

1. Maximizing 401K tax deferred.
2. Maximizing Roth IRA.
3. Saving additional 15-30% in taxable account.
4. Money for vacations, beer and Poke (Popular food item in Hawaii, you clicked didn’t you)
5. Additional mortgage payments.

Paying down his mortgage was the right move financially for Done By Forty as it made him feel more comfortable.  Instead of dwelling on that DBF is now looking to leverage and invest in a turnkey rental property on borrowed money instead of paying cash.  When you miss out on a financial opportunity you should take that as the price to pay for a financial education.

Ryan at Impersonal Finance had a great write up about recognizing opportunities and seizing upon them. There will always be financial opportunities, the problem is it’s often very difficult to recognize them when it’s happening.  Why is that investors and rich people always seem to be make money while the middle class are often missing out or late to the party? We hear it all the time how wages are stagnating and the middle class is in decline.  In order to get ahead wages alone won’t do it, only having investments that grow faster than inflation will allow you to get ahead.  Having a 1% savings account is not getting ahead.

“Obvious 2009 was the time to invest in the stock market, market’s too high I’m waiting for a correction”
I hear that all the time that 2009 was a great year to buy and the market’s just too high now. They’ll time the market and put money in when there is a correction, I know some that are still waiting from 2012 for that correction. It wasn’t an obvious time to buy in 2009, I invested nearly $30,000 that year and lost 35% by the summer. This was on top of the $100,000+ I lost the year before. With all my losses I regretted having so much invested, I was envious of those who had made extra mortgage payments or paid off their homes. Even the YOLO crowd was vindicated, why bother investing when you’re going to lose it all anyways. Better to spend it now and enjoy your life.

Price to earnings (P/E) is what an investor is willing to pay for a company’s earnings to own that stock. The current P/E in the stock market is 18, the average investor is willing to pay 18 times earnings. In 2009 with earnings collapsing the P/E was around 30 and rising as sales were collapsing. The market is cheaper today than the “obvious” 2009 prices.

I thought it would take 10 years to recover what I had lost.  I regretted having so much in stocks, instead  I wish I contributed the minimum and used the rest of my surplus funds to pay off my rentals.  Every month I invested was another month of losing money.

In 2010 and 2011 it was “obvious” to buy a home.  The federal government was giving out $8000 in tax credits to stimulate the housing market.  Ask anyone who bought in those years, they lost more than the tax credits due to falling prices.  In some markets they lost the tax credit and their down payments when their house dropped in value more than 20%.

There is always opportunities in a well diversified portfolio.
When I experienced my first bear market after the tech bust in 2000 I got scared and shifted into bonds, locking in my losses and waiting for a rebound. I got back in right after the market had rebounded 40%. That lesson taught me not to stop or lower my retirement contributions despite my losses. Instinctively I wanted to send extra payments to my “safe” investments of paying down my rentals. What I learned from my missed opportunities from my first bear market allowed me to seize on the opportunities from the second one.

Block out all the noise and not worry about where the markets are headed. (I have no idea) There are a lot more naysayers in this world (read the comments section in any Yahoo finance article) that will do absolutely nothing to improve their finances. A third of people despite the worst recession of our lifetime have less than a $1000 saved.  How big will that regret be when they can never retire?  How do we know in 10 years stocks today won’t look cheap? Homes bought today will be a third paid off that will cash flow for you,  you’ll wish you bought five more.

Budget, earn more money and get off the sidelines. Aggressively save into all your retirement accounts. Save another 20% in taxable accounts, look for real estate properties. The most important thing is when the crash comes (and it will) you continue to contribute the same amount to each asset class. Don’t change your investing plan (shift more into bonds or cash, sell properties etc.) You will benefit from the rebound and be much farther ahead than the naysayers.

What is your biggest financial missed opportunity? What financial lesson did you learn?

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  1. I’m not sure what my biggest missed opportunity is at this point. I always feel like I should be putting more away towards retirement. It’s hard to balance investing and student loan payoff.
    Liz recently posted…Greek Salad RecipeMy Profile

  2. I often think about what our current net worth situation would be like if we hadn’t blown all of our money for the last 17 years. Obviously, we can’t do much about that now, but we can make better decisions going forward.
    Laurie @thefrugalfarmer recently posted…Frugal Fajitas RecipeMy Profile

  3. The biggest opportunity we missed was that we didn’t start investing early enough. We basically wasted our early and mid-twenties! I wish I could go back in time.
    Holly@ClubThrifty recently posted…Cash Money: $5,459 March Income and Blog UpdatesMy Profile

  4. I have had some missed opportunities but you can only see them from hindsight. There were some stocks I wanted to invest in that I didn’t out of fear. I also had way to much money in cash partly because of the fear that the markets were too volatile and also because I was saving up for a down payment. That money would have done a lot better invested somewhere else besides a savings account.
    Andrew@LivingRichCheaply recently posted…Is it REALLY Okay to Take Paternity Leave?My Profile

  5. Right now I wonder if we are missing opportunities because we are always fully invested. Whenever we accumulate $5000 cash from dividends or interest we immediately reinvest that. So if a great opportunity comes along because of a stock’s share price taking a temporary dip, or we learn of a promising company that is due to get a new cancer drug approved etc., we don’t have the available cash to make a quick move on the investment. However, if we let a lot of cash lie around not invested, we lose dividend, interest or appreciation. Quite the conundrum.

  6. Well said Charles. Hindsight is 20/20, and after having learned from 2009, I keep track of a number of stocks I would be comfortable owning and at what price I would be comfortable buying them. That way I know that even if they fall below what I paid, I’m still okay with the deal I got. I think you’re absolutely right that a crash is no time to decrease your investments, I’d argue possibly increase them. I think our biggest missed opportunities have been not investing early enough, and not investing enough. For a couple of years I put the minimum into my 401k, or 10% thinking I was ahead of the game, when in reality, that would force me to play catch up.
    Ryan @ Impersonal Finance recently posted…emergency fund in actionMy Profile

  7. I just sent a friend of mine your P/E ratio comment, I love it! People always point to 2009 as the ideal time to buy. Looking back, yes, it was, but it’s easy to say when you’re currently in 2014. It’ll be easy to analyze 2014 in 2019 as well ;)
    DC @ Young Adult Money recently posted…3 Reasons You Should Finance a Car Instead of Pay CashMy Profile

  8. Thanks so much for the mention and the nice words, Charles! I’m glad I’m able to put our missed opportunities in the rear view and, like you said, at least bank the education I learned in the meantime. 2008 taught me to understand any investment before buying in. Paying off our home taught me about opportunity costs and the power of leverage, when used properly. I’m sure there’ll be a lot more (expensive) lessons along the way, but hopefully they end up saving me more than they cost!
    Done by Forty recently posted…What Are You Going to Do When You Retire?My Profile

  9. Everyone makes mistakes and in the end regret them. There is nothing you can do about it. If it is really bad, that’s what insurance is for.
    David recently posted…Is Global Warming truly happening?My Profile

  10. I hate to admit it but I know that my biggest missed opportunities cover practically all the years that I was supposed to be already living a frugal life. Yes, that came a bit too late although I am hoping that it’s not that way too late. Do I sound like I am from the redundant department of redundancy? Nevertheless, I am working on it if only to become a good example to my children as I know at this age, I can no longer make it to absolute financial freedom.
    Jen @Sprout Wealth recently posted…How to Use Game of Thrones to Sprout WealthMy Profile

  11. I’ve had several enormous financial set backs and both really just hurt my soul.

    It’s the reason why I like having a large chunk of change in risk-free assets. When times are good, it’s easy to forget when times were bad.
    Financial Samurai recently posted…Pay Down Debt Or Leverage Up To Buy More Property?My Profile

    • I agree Sam,man I was cocky last year when my roth went up 83%. This year at the bottom it got whacked 18%,growth stocks will do that to you.

  12. As the Bogleheads Investment Philosophy says:

    Live below your means
    Invest early and often
    Never bear too much or too little risk
    Never try to time the market
    Use index funds when possible
    Keep costs low
    Minimize taxes
    Invest with simplicity
    Stay the course
    Bryce @ Save and Conquer recently posted…Grok’s Tips #11 and #12My Profile

  13. I regret not getting serious about investing in the market sooner. Even though we’ve had a bull run for a bit here, I do think the market is fairly, not overly, priced. I think people remember two significant declines that happened in the space of a decade and are fearful about getting in after this perceived run up. In the long run, I’m still better off investing now rather than trying to wait for the right time.
    Kay @ Green Money Stream recently posted…March Investment and Side Income UpdateMy Profile

    • Kayyou still have a lot of time on your side. The key is sticking to your plan when the bear market comes. A friend of mine invests right along with me because he missed out on a few of my picks. With the volatile market he’s thinking of cashing out which is a big no no, but he can’t stomach the ride.

  14. Aside from not investing early enough, I feel my biggest financial opportunity missed was having a lot of chunks of time in my life where I was not working. I was too proud to take any job during my first non-employment period, which lasted 8 months. I could have made some cash from working a retail or restaurant job and kept myself busy while I applied for jobs.

    I feel like I’ve done pretty good considering my situation, but at the same time I feel I could be doing better if I had filled in all those unemployment gaps.
    MakintheBacon recently posted…Would You Own a Summer Cottage?My Profile

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