Do You Make These 3 Investing Mistakes?

Updated: February 26, 2022

Investing enables us to make money work for us, instead of just the other way around.

How hard that money works and how much it earns in the future, usually depends on our ability to make good and sound investment decisions.

That’s why it’s important not only to set aside money for investing but also – to hone the investing skills that will allow us to choose the best investments that will suit our financial needs.

Below are three mistakes that people often commit before and during investing; along with the things you can do to avoid making them.

Mistake No. 1: Investing without a SWAN fund.

“What’s a good mutual fund to invest in?” a friend asks me the other day.

I know he just got out of credit card debt so I was surprised to learn he’s thinking of investing in mutual funds. So I asked him how much money he has in his SWAN fund.

“SWAN fund… what’s that?” he asked.

“Your sleep-well-at-night fund,” I answered. “Otherwise known as your emergency fund, which is six months worth of your regular monthly expenses.”

Most people, when they finally get out of debt or come across a windfall, become too excited and make the mistake of immediately investing their money in instruments that are too risky for them.

Always remember to build your emergency fund first, before exposing yourself to any kind of investment risk.

Mistake No. 2: Investing without an objective.

A friend told me he wants to invest P50,000 in the stock market.

“Why?” I asked.

He said because he wants to earn money.

Then I asked him again, “Why do you want to earn money? What are you going to do with the money you’ll earn from the stock market?”

He was silent for a moment and then he told me, “So I could have more money to buy whatever I might need in the future.”

Are you like my friend? If so, then you’re investing without an objective – which is a mistake.

Understand that money is meant to be spent, and when you invest, it means that you want your money to grow so you can afford something that you want to buy in the future.

If my friend, for example, wants to buy an iPhone 5 when it comes out by the end of the year, then I’d tell him to just put the money in a time deposit because:

  1. His P50,000 is probably already enough to buy an iPhone 5 when it comes out. So no need to make it grow.
  2. Putting it in a time deposit would prevent him from spending the money before the iPhone 5 comes out.

By having a clear and specific investment objective, you’ll have a better gauge on the level of risk you can afford – which you can then use to determine the most optimal type of investment which you should get into.


Mistake No. 3: Investing solely for capital gains.

“I’m planning to sell my stocks,” a friend told me about a week ago.

“That’s right, the market is up and it’s a good time to sell,” I answered. “What are you going to do with the money you’ll get?”

“I’m planning to reinvest them in mutual funds and I’m keeping the rest for buying stocks again when the prices go down.”

“Sounds like a good plan,” I replied. “What about investing for passive income?”

My friend fell silent and analyzed my question. After a few minutes, he realizes the investing mistake he’s committing which I just pointed out.

Investing for capital gains is good for the financial future, but one should also invest to improve the financial present – something that passive income achieves.

We all know it’s important to live below our means, and if we want to improve our present lifestyle then we should find ways to increase our means.

Unfortunately, there’s a limit to what we can actively earn; thus the importance of having passive income.

By investing in assets that give regular cash flow; such as businesses, rental properties, and even dividend-paying stocks – then we are effectively increasing our monthly income.

When we have more income, then we have more money to spend, and ultimately – better means to enjoy life today.

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Photo credit: pascal v50


  1. Sir Fitz, I agree totally with Mistake #3! If an individual continues living solely for the, he/she will regret appreciating the means of how the fruits of labor were gained! I’ve been planning to open a blog of my own focusing on Personal Finance and Self-Empowerment, I hope you could check it out in the future! Great post, once again!

  2. this is one of your best posts! thanks for all the tips. even if i don’t have the means to invest today, i keep learning a lot so i know that when i do invest in the future, i won’t make the same mistakes i did in the past (i.e. investing without a swan fund and without a clear objective).

  3. Mistake No. 2: Investing without an objective. –> GUILTY! I have a mutual fund (equity) but I don’t have a clear objective for it. Basta meron lang. Could be additional funds for retirement, though…

    Fitz, please expound on this- “Investing for capital gains is good for the financial future, but one should also invest to improve the financial present – something that passive income achieves.”

    Please give concrete examples. Sorry, umaga pa kasi dito sa bansa na nasaan ako kaya hindi pa masyado maka “grasp” ng ideas hehe. Thanks.

  4. You are so right. Always know why you are buying and why you are selling and have a specific plan for the proceeds. I think many people invest blindly which is why it is nice to have bloggers such as yourself.

  5. Great post Sir! It really makes me realize so many things about managing my finances. πŸ™‚

  6. Hi Fitz,

    I live in Singapore, and go the Singapore American School. I am currently taking a Personal Finance class, and I have to say your 3 tips are really helpful. I am always thinking that you should just invest to get more money, but now that you point out Mistake #2, I’ll be sure that when I start investing, I will have an objective first. Your idea of having a SWAN Fund is great too, because you always want to be safe and have money to fall back on. I never really thought about passive income before, but now I know it’s a smart idea to invest in assets that give a regular cash flow. Thanks for the great tips Fitz!

  7. Hi Fitz, should a swan fund always be available at hand? I’m thinking of investing my whole swan fund in equity to add to my current account. I’m thinking since my current equity account already has more than 6 months of my salary and has passed 2 years already, maybe that can be my swan fund since i can withdraw it anytime? your thoughts please. πŸ™‚

  8. Hi anachanel, putting your swan fund on equity can be risky. Yes, it’s readily available but it also carries risk. It’s value might be lower than your capital if you need the money.

    We’re just so lucky today because that the stock market has been very bullish for the past 2 years! πŸ˜€

    A swan fund is basically an emergency fund – money you can use for unforseen but important expenses, like immediate home repairs, medical emergencies, losing a mobile phone, business laptop breaks down, etc.

    My suggestion, take out 6 months worth of your salary from your equity and put it in a less risky investment. Personally, I have 3 months revolving in a 30-day time deposit, and the other 3-months in a low-risk UITF.

    The UITF money is something you can redeem within a few days, while the TD, within a month or less.

  9. I think I made mistake number 2. In reality, when I see my money, I don’t know what to do with it, so I make it work for me through investments. What if I don’t really want to buy anything? What if I just want seeing that big fat cash on my passbook? I have long realized that material possessions only make me happy for a short period of time and I am contented with feeding and cuddling with my cats.. Aside from seeing big fat cash on my passbook, my financial goals aren’t that clear! Can you believe that I actually wrote the word “NOTHING” as the purpose in my UITF application? >_<

  10. Hi hyuna. I understand what you mean because a friend is also like that. For what it’s worth, the least objective you can have is simply to make sure that your money grows more than the inflation rate every year.

    That means investing in instruments that give higher than 6% annual growth – so that when the time comes when you actually want buy something, your money has not lost its original value.

  11. Everything is great Fitz I agree with you except the one thing you said about money — money is meant to be spent. Perhaps a part of it someday but I would rather keep a huge part of my invested money now until I grow old and die. It’s for peace of mind and something that other people can use someday when I am not around anymore. If we teach the rule that money is meant to be spent, that takes investing out of the picture. I would like to think money can sit forever in a bank and even in my deathbed I can say I die rich πŸ™‚ Just my point of view. I agree with you on the rest.

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