Investment regrets are part of the game, and we’ve all been there — whether it’s wishing you’d jumped on a skyrocketing stock earlier or bailed out of a sinking ship sooner. Xiao Hong Lee also had his fair share of investment regrets.
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Lee retired in his mid-50s and currently lives with and takes care of his elderly parents in Taiwan. While he doesn’t have many financial worries — as his expenses are low and he’s built up a considerable nest egg to support himself and his parents for the next few decades — he regrets some investment decisions he made in retirement. He estimates that these regrets cost him over $500,000.
Read on for some rock-solid help avoiding costly investment errors during your golden years.
Investing Too Much Into NIO
The stock prices of NIO, a Chinese automobile manufacturer specializing in designing and developing electric vehicles, soared around late 2020 amid speculation the Chinese government would push to transition primarily to electric vehicles. Simultaneously, the company posted strong vehicle delivery numbers, driving the stock price higher.
However, due to negative market momentum and a slowdown in the global EV market, its stock prices started dropping in late 2021 and are worth only about $5 today. That’s a massive fall from its all-time high of $62.84 in February 2021.
“Instead of cutting losses when prices started to drop, I let FOMO get to me and tried to justify holding the position, which cost me close to $20,000 when I finally sold it,” Lee said.
Lee believes even though Nio stock once held potential in the EV market, that ship’s now sailed — especially since one of NIO’s largest institutional investors, Baillie Gifford, dumped 80% of its stake as of Q4 2023.
“Everything seems so obvious in hindsight, but the reality is that you just never know, especially with individual stocks,” Lee said.
Today, most of his investment portfolio consists of ETFs and less-risky assets, albeit still fine-tuning his strategy to balance risk and reward.
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Investing Too Little Into Nvidia
“After seeing NIO’s stock price tumble, I became more conservative with my investments, maybe too conservative,” Lee admitted. “To be honest, I’ve known about Nvidia for a while and had enough information to estimate it was undervalued, but was just too unconfident to add much to my portfolio.”
He said that at the time, there was no way to fully know if AI would drive up Nvidia’s price or if the chance of AI’s potential was already folded in.
“Ultimately, nobody has a crystal ball, and companies can flop at any point. Nvidia could have tanked and lost me that initial investment, so I try not to feel too bad about it. But still, if I had a time machine, I would definitely go back in time to drop a few more thousand dollars into it,” Lee said.
For context, Nvidia Corporation is a technology company known for designing and manufacturing graphics processing units (GPUs).
Nvidia currently controls about 80% of the high-end AI chip market, a position that has sent its stock market value soaring this past year — from around $47 to over $120 today (or $1,200 before the 1 for 10 stock split). In February 2024, Nvidia officially overtook Google’s parent group, Alphabet, to become the third most valuable company in the United States.
Remember, there’s always an argument for why a stock will skyrocket in the future and a counterargument for why it’ll flop. Investing in individual stocks is inherently risky, so never invest more than you can afford to lose, especially if you’ve retired.
Not Buying Bitcoin When It Was Cheap
Not buying Bitcoin a decade ago when it was dirt cheap still bothers Lee, as it does for many others.
“I know investing in crypto is super risky, especially in retirement, but if I had just invested $5,000 into Bitcoin when it was less than one grand in 2016, I would be sitting on $500,000 today,” he said.
As of July 16, 2024, Bitcoin is hovering around $64,000 — a 100-fold increase from the same time eight years ago.
It’s important to note, though, that cryptocurrency is speculative and highly volatile. If you’re retired and considering crypto investments, only allocate a small portion of your portfolio you can afford to lose and speak with a financial advisor before buying cryptocurrency. There have been too many stories of retirees losing their entire life savings due to sudden crypto plunges and fraudulent schemes, so avoid cryptocurrency if you’re risk-averse and unwilling to take the gamble.
How to Minimize Regret With Your Investment Decisions
Investing always carries risks, but there are a few ways to minimize those risks and feel more confident about your investment decisions.
- Diversify your portfolio – Diversification means not putting all your eggs in one basket and investing in a broad range of investments across different asset classes, like stocks, bonds and short-term investments. You could even further diversify your investments by company size, market cap and geography.
- Understand your risk tolerance level – Your risk tolerance level is your ability to handle the risk of losing your capital, and it mainly depends on your age and financial situation. For example, if you’re young and don’t have many financial responsibilities, your risk tolerance level is higher compared to someone in their 40s and married with five kids. Of course, your high-risk tolerance level doesn’t mean you should just dive headfirst into every investment opportunity without doing your research. However, it means you’re likely more comfortable with market volatility.
- Use the dollar-cost average strategy – Trying to time the market is risky and often backfires if you end up buying and selling at the wrong time. The dollar-cost averaging strategy mitigates this risk by taking the emotion out of investing. Instead, you’ll invest the same amount of money at regular intervals over a certain period, regardless of price.
- Monitor and adjust your portfolio regularly – Smart investing takes effort. Always keep an eye on your portfolio’s performance and make adjustments depending on your risk tolerance level and current financial situation.
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This article originally appeared on GOBankingRates.com: I Retired in My 50s: Here Are 3 Investments I Regret Making in Retirement
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
