As the year comes to a close, I can say this has been a real eye-opener of a year for me. Being in my mid 20's, this is the first year of negative returns I have had. Here are the top mistakes I made this year in terms of personal finance that I will not be making next year.
Ignoring Benefit of Dollar Cost Averaging for Roth IRA
I front loaded all of my Roth IRA contributions in the first two months of this year. I thought that the market was already as far as it would go and it was a good buy. Only time will tell whether or not those purchases were a good buy. Next year, dollar cost averaging is the way for me. I will purchase only no transaction fee mutual funds and will do them every month at the least. The actual time frame will depend on minimum transaction amount per fund.
Ignoring Budget
I had sufficient money and got careless. New budget already created and being monitored.
Ignoring Diversification in 401(k)
Presently, I think that my play this year in having at some point all of my money go into a defensive play in March was a good one. The fund remained steady while everything else declined. It somewhat fell in the last quarter of 2008, but I think overall it would have been more prudent to do some balancing throughout. I'm not committed to re-balancing yet but will be shortly.
Just like Forest Gump always said, "I'm not a smart man." I bought the bad ones - E-Trade (ETFC) and even worse, Fannie Mae (FNM). Please Rinse and Repeat - Past performance (or price) does not indicate future performance (or price).
Peek-a-Boo!
Just because I have a nice website and tracking software doesn't mean I should be looking daily at performance percentages - it's not healthy and doesn't make my portfolio better off.
Next year may not be better, but I have been forewarned.
