When Ryan asked that I participate in this highly worthwhile exercise, I indicated that coming up with material for the topic would not be an issue. In that spirit, I’m offering a 2-1 special. Two separate, yet related, very expensive mistakes that I’ve personally made and that have played out over the past five years or so.

If you’ve been in the market for any length of time you’ll recall the financial crisis of 2008/2009 and day after day (after day, after day) of rather dramatic market action (read: losses). No matter the company, it was getting crushed, and by all means, my portfolio was like (almost) every other.

Here’s the thing. Though I’d been coached to “be greedy when others were fearful”, I didn’t have any cash laying around to take advantage of the chaos. Selling existing positions wasn’t an option given the mental strain caused by crystalizing the continually growing paper losses, and therefore, I did nothing. I don’t count this as a mistake however, just a lesson learned. That lesson – always have access to liquidity to take advantage of opportunities as they arise.

And from that point on, I’ve done just that. By 2010, I’d managed to put some cash together and began dipping my toes into a rally that to me, and many of the pundits I followed at the time, seemed too good to be true. A year after bottoming in March 2009, the S&P 500 had rocketed ahead by 56% - an astounding move, which appeared to fly directly in the face of a host of problems that still existed in the financial world. So, being the sheep that I was at the time, and spending far too much time reading about all the negatives that were sloshing around, all that I did was the relative toe dip mentioned earlier.

That was a mistake!

Paying attention to macro worries and naysayers cost me literally tens of thousands in either a) investments that I didn’t make (and that subsequently continued to rise) because I was waiting for a better time, or b) investments that I did make but sold out of far too soon, happy with the two-month, 20% gain, or the like, generated.

Mistake #1: Following the advice of forecasters.

Don’t pay much, if any attention to the macro mavens and talking heads/pundits that are more than happy to tell you how awful everything is. Over the long-term, great companies will do what great companies do, make their owners lot’s of money - regardless of fluctuating economic circumstances.   

Unfortunately it took one more mistake to drive this message home.

Fast forward to early-2013. With my forehead bruised and battered from banging my head against the wall for missing all of the wonderful opportunities that had existed in the preceding years, all of a sudden mining stocks began to weaken. Based on the assessment of those same macro mavens, the financial world was still on the verge of collapse, governments were still printing money, and what better way to take advantage of the eventual collapse than to get some exposure to gold.

Even though I’d covered the gold sector for several years, I never really “got it”. All of these massive operations around the world producing something that nobody even uses in day-to-day life. But hey, gold company stocks were getting smoked in early-2013 and this just reeked of a way to finally put some cash to work in a more meaningful way.

Well – I probably don’t need to go into detail about how that’s worked out.

Mistake #2: Investing in mining companies.

For the most part, mining companies, and especially gold companies are horrible investment vehicles. They are massive capital consumers, which means horrible businesses, and are entirely dependent on an underlying commodity that has no real fundamental value and is entirely unpredictable. If you do chose to have some exposure, keep it small. Very small. This can be tough for us Canadian investors given the prevalence of mining companies in our market. 

Luckily, I’m relatively young and didn’t completely blow myself up with these entities. The damage has been contained. However, though I’ll never say never, it’s going to take some kind of argument to ever get me interested in a mining company again.

Final thought

What I’ve learned, most of all, is that investing is a journey. Mistakes are a constant and all that we can do is take what we can from them and move on, hoping to never repeat the errors of the past. Exercises like this will ideally impart some wisdom and hopefully contribute to you not making the same errors as we have!

Foolishly yours,

Iain Butler, CFA

Chief Investment Adviser, Motley Fool Canada

Don't forget to check out the investment mistakes from Mark Seed (My Own Advisor) and Ryan Modesto (5i Research).