We quiz financial experts to reveal the biggest mistakes they’ve made with their personal finances over the years – and the lessons they’ve learnt.
Have you ever missed a credit card payment? Bought shares you thought would soar, which ended up sinking without trace? Staked a hefty sum on a sure-fire winner at the races, only to see it limp in far behind the rest of the field?
If you have answered yes to any of these, then rest assured you’re not alone. Even the gurus that make their living in this world have made errors.
We quizzed leading fund managers, independent financial advisers and other industry observers on the biggest money mistakes they have made in their personal or professional lives, and asked them what they learnt from the experience.
Juliet Schooling Latter, director, FundCalibre
When Juliet sold her flat in 2008 she thought it was great timing. Prices were falling and she earned interest on the proceeds while renting and waiting to buy a bargain property.
Her friend took the opposite approach, buying a house he could barely afford at the top of the market.
Over the next eight years, the base rate fell to 0.25% and property prices rose by 20%.
“He was on a low base rate plus a ‘next to nothing mortgage’ and has seen his mortgage payments fall in the past decade,” she adds. “This has meant he could save more to pay off the mortgage.”
Juliet only bought a property again two days before the Brexit vote. “That’s why I stick to researching funds. Timing the property market is not my forte!” she adds.
Lesson: Don’t try to time the property market.
Andy Gadd, head of research, Lighthouse Group
Andy regrets a mistake he made 20 years ago. He had his own flat in Croydon at the time and decided to move back to his home city of Bristol.
“I had the choice of selling the flat or renting it out – and decided to sell,” he recalls. “I wish I had kept that flat as a buy to let.”
Lesson: Plan for the long term.
Danny Cox Chartered financial planner, Hargreaves Lansdown
Danny bought his first home in the 1980s – before he worked in financial services – and didn’t shop around for his mortgage deal.
“I ended up with an expensive and inflexible endowment mortgage with a niche lender,” he recalls. “When I moved six years later, the endowment was worth nothing, the house was only worth what I paid for it, and I’d made no progress on the property ladder.”
A repayment mortgage would have been a better option.
Lesson: Do your research and shop around for the best deal.
Peter Sleep, senior investment manager, Seven Investment Management
“My biggest financial mistake was not buying a house in Manchester in the early 1990s, when I used to live there,” he says. “I put in an offer on a nice, small house that was on the market for less than £30,000, but let the offer drop when someone else bid higher.”
He ended up buying nothing, but missed out on rising property prices.
Lesson: Be careful not to miss out on opportunities.
Martin Bamford, managing director, Informed Choice
Martin believes he paid the price for getting married too young.
“The cost of the subsequent divorce, combined with very different attitudes towards money management during the marriage itself, set me back several years in terms of achieving financial freedom,” he says.
It was a different story when he got married for the second time.
“I’ve learnt from those mistakes and have made sure I’m on the same page as my second wife,” he explains. “We share similar attitudes towards spending and saving, and both work towards shared financial goals.”
Lesson: Share the same financial goals as your partner.
Ana Cuddeford, investment director, M&G Investments
Ana prided herself on being good with money after having had a Saturday job from the age of 14, but that all changed when she went to university.
“I hadn’t counted on how tempting it was to keep spending on plastic,” she said. “I paid off the minimum each month but didn’t appreciate the impact of compound interest on the balance.”
It got to the point where she was avoiding opening credit card statements.
“I had to use my student grant to pay off the debt and then work two jobs one summer to have any money to get me through the following term,” she recalls.
Lesson: Don’t let credit card debts spiral.
James de Bunsen Multi-asset fund manager, Janus Henderson Investors
James was left counting the cost from bank charges in his youth.
“I dread to think how much I have paid in fees,” he recalls. “There was an obscene amount of overdraft charges caused by me living beyond my means.”
As well as some financial prudency in those early years, some of the costs could have been avoided by better debt management.
“I suspect I could have mitigated them by using a credit card and paying it off every month rather than having a current account overdraft and paying punitive fees,” he says.
His advice is to read the small print. “It’s boring but if you don’t, then that’s a lot of beer money being paid to bankers when you’re a student,” he adds.
Lesson: Watch out for overdraft charges.
Victoria McNulty Paraplanner and financial planner, Informed Choice
Victoria learnt the valuable lesson of not procrastinating when she was in her first job after university.
“I was eligible to join the company pension scheme after six months, but it took me another year to fill in the paperwork,” she recalls. “I missed out on ‘free money’, and I should have known better!”
It’s something she now bears in mind. “When I start work at a new company, I always join the pension scheme as soon as I am eligible and encourage others to do the same.”
Lesson: Join your company pension scheme right away.
Georgi Bennett Financial adviser, Skerritts Chartered Financial Planners
Georgi had spent a relaxing time on holiday, but paid the price when her credit card bill landed on the doormat the following month.
“I was careful with my holiday budget, but didn’t realise the charges that the bank added every time I withdrew cash,” she says. “I was using my card like I would in the UK for small purchases.”
She racked up bank fees of £100 in just one weekend! “I’ve since got a credit card that doesn’t charge fees overseas,” she adds.
Lesson: Get the right credit card for overseas spending.
Brian Dennehy Managing director, Dennehy, Weller & Co
“I wish I’d taken all the advice I’ve given to clients over the past 30 years as although I haven’t done badly it could have been so much better,” he says. “The best examples were not investing as much as I’d have liked in corporate bonds from 2009, which generated extraordinary gains for two to three years, and in Japan from 2011.”
Lesson: Make a plan and follow it through.
Alex Davies, chief executive, WealthClub
Alex Davies found out the hard way that investing in friends’ business ventures can be fraught with danger. Not only is there the temptation to overlook the usual analysis, you also run the risk of the friendship going sour if the project fails.
“I lost £20,000 and learnt it’s much better to invest through professional firms as you make a purely business decision,” he says. “Unless your friend is a genius, my advice is to go through conventional channels.”
Lesson: Never invest without the proper due diligence.
Gavin Haynes, managing director, Whitechurch Securities
Gavin knows the dangers of following the herd in investing after buying into a technology fund in the dot.com boom – only for it to plummet when the bubble burst.
“The belief that many individuals cannot be wrong may result in investors making wrong decisions,” he says. “However, the herd is not always correct.
“Since then, I’ve invested with a contrarian stance,” he says. “Investors should be cautious about following consensus and aware that universally favoured investments may not be the best!”
Lesson: Don’t follow the herd.
Adrian Lowcock, investment director, Architas
Adrian believes embracing compounding – the snowball effect when you receive interest, not only on your original investments, but also on any interest, dividends and capital gains that have accumulated – would have bolstered his finances.
“One of my biggest regrets is not getting on board with this powerful financial tool earlier as the real benefits from compounding come down the line and the longer you have, the bigger its impact,” he says.
He adds that even starting a few years earlier would have made a difference. “It is hard to see in the early years as any benefits can be hidden by rises and more importantly falls in the markets,” he points out.
Lesson: Consider the benefits of compound investing.
Darius McDermott, managing director, Chelsea Financial Services
“I bought a single stock in 1998 and within six working days it had gone up 85%,” he recalls.
But instead of taking the profit, he stayed invested in the company. “The broker convinced me to stay invested and that it would triple,” he says. “It went bust and I lost the lot.”
Lesson: Don’t be greedy.
Graham Spooner, investment research analyst, The Share Centre
By contrast, Graham made a large profit from one of his share picks, but holding on to the stock would have given him a six-figure return!
“I bought about £500 of (online retailer) ASOS in early 2004 when it was about 8p per share and sold the holding a few months later when they hit 24p,” he recalls. “I was absolutely delighted as I’d made a massive percentage in just a few months.
“Had I kept them for 10 to 15 years my holding would have been worth over £100,000,” he admits. However, , I was very happy to have locked in such a massive gain over a short period.”
Lesson: Consider investing for the longer term.
David Coombs, head of multi-asset investment, Rathbone Unit Trust Management
David resisted the lure of technology stocks as the dot.com boom gathered pace in the late 1990s, but decided his analysis must be flawed. “I capitulated and bought some as I felt I was missing something,” he recalls. “Of course, the following year the bubble burst.
“It didn’t wipe me out because I was quite late to the party and didn’t have much exposure, but the stocks I bought right at the end got absolutely hammered,” he says. He realised you can be right – even when there’s noise to the contrary.
“Every instinct told me it was wrong and, since then, I’ve been incredibly suspicious of hype and trends in the market,” he says.
Lesson: Trust your instincts – and be suspicious of trends.
Giles Parkinson, manager, Aviva Investors Global Equity Endurance fund
Giles regrets subscribing to the ‘peak oil thesis’ a decade ago, in which models predicted maximum production levels would be hit and prices continue to rise.
“It looked correct for a while as oil marched from $60 to $150 a barrel,” he says.
However, the situation changed. “Yes, the resource is finite, but I overlooked the unlocking of new sources of supply from applying fracking technology to shale,” he admits.
The situation proved to be the same this time round.
“The old commodity adage of ‘high prices cure high prices’ is as true as it ever was, and the oil price today is $45.”
Lesson: Be wary of new theories.
Patrick Connolly, certified financial planner, Chase de Vere
When Patrick started in the investment industry, he thought he could make better short-term gains by picking individual shares and watching them rise in value.
“This approach didn’t quite go to plan,” he recalls. “I invested in some shares and was then checking their prices about every 15 minutes to see if they had gone up in value. I would be disappointed when they hadn’t risen and even more so if they fell.”
He realised investing wasn’t a “get rich quick scheme”. “I switched from picking individual shares to selecting investment funds,” he explains.
“This provided diversification to spread risks.”
Lesson: Be aware that stock picking can be dangerous.
Rob Griffin writes for The Independent, Sunday Telegraph and Daily Express