The Top 10 Ten Investing Mistakes We All Make | Cody Garrett | Ep 535
Feb 24, 2025
auto_awesome
Join Cody Garrett, an expert in investing and financial planning, as he dives into the costly mistakes even seasoned investors make. Cody emphasizes mastering asset location for tax efficiency, helping listeners understand the optimal placement of investments. He also discusses the importance of active management in retirement contributions and the benefits of donating appreciated securities. Additionally, he highlights the significance of intentional giving and proactive financial planning to secure wealth for future generations. Tune in for valuable insights!
The newly launched ChooseFI member site enhances community engagement by facilitating discussions and events without relying on social media algorithms.
Understanding the distinction between asset allocation and asset location can significantly improve tax outcomes and overall investment strategies.
Balancing financial health with holistic wellness encourages individuals to maintain strong relationships and prioritize quality of life alongside their financial planning.
Deep dives
Introduction of Chooseify Member Site
A new Chooseify member site has been launched, designed to replace the existing Facebook groups for the community. This user-friendly site allows members to register for free, making it easier to connect and participate in discussions and events. Updates are continuously shared to enhance the platform based on community feedback, marking it as a collaboratively built personal finance resource. This new approach aims to foster better engagement without relying on social media algorithms for notifications.
Common Investment Mistakes
The episode highlights ten common mistakes savvy investors make, focusing on the first one related to asset location. Asset allocation refers to how investments are divided among different asset classes, while asset location pertains to where those assets are held in investment vehicles like IRAs and brokerage accounts. An example demonstrates that even with the same overall portfolio mix, placing stocks in tax-advantaged accounts and bonds in taxable accounts can lead to better tax outcomes. This demonstrates the importance of intentional investment strategies for optimal financial benefits.
Investing Contributions Effectively
Many investors, even those well-informed, often neglect to invest the money contributed to their accounts promptly. A common scenario occurs during the rollover from a 401k to an IRA, where individuals may overlook investing their cash for extended periods, leading to missed investment opportunities. Additionally, failing to automatically reinvest dividends and capital gains can result in accumulating cash equivalents in brokerage accounts. Investors are advised to regularly check and adjust their investment settings to ensure efficient use of their contributions.
Return on Hassle in Financial Decisions
The importance of assessing the return on hassle is emphasized, particularly when it comes to switching banks for minor interest savings. Individuals are encouraged to evaluate whether the time and effort spent pursuing negligible financial optimizations are worth the potential savings. An example is provided comparing the benefits of moving large sums versus minimal gains between high-yield savings accounts. The overarching message is to prioritize simplicity and avoid overcomplicating financial decision-making for minimal returns.
Charitable Contributions of Appreciated Securities
The discussion includes the advantages of donating appreciated securities instead of cash to charitable organizations. Donating stocks allows individuals to avoid capital gains taxes and provide a larger contribution amount to charities compared to cash donations. Even with the standard deduction limiting itemized tax benefits, this strategy helps maximize the impact of charitable giving. Additionally, the use of donor-advised funds is recommended for individuals looking to manage their charitable contributions effectively.
Holistic Wellness and Financial Independence
Lastly, the conversation shifts towards the significance of holistic wellness in conjunction with financial health. While focusing on finances is crucial, neglecting physical health, mental well-being, and relationships can lead to an imbalanced life. The discussion includes maintaining strong social connections and making memories while one is still capable of enjoying life. The overarching principle is to ensure that financial planning serves to enhance overall quality of life, rather than detracting from it.
Brad and Cody Garrett from Measure Twice Money dive into the ten most common mistakes that even savvy investors make. They cover essential topics from asset location to maximizing health savings accounts (HSAs), emphasizing a holistic approach to financial wellness.
Key Takeaways:
Understanding the impact of asset location on tax liabilities.
Importance of auto reinvestment for maximizing investment growth.
Weighing the hassle versus savings in financial decision-making.
Strategies for maximizing charitable contributions tax-efficiently.
The significance of holistic wellness in financial planning.
Timestamps & Key Points:
00:01:50 Asset Location
Understanding asset location and its effect on tax liabilities.
Choosing the right types of investments for taxable vs. tax-advantaged accounts.
00:15:46 Investing Contributions
Importance of logging into your accounts to avoid cash sitting uninvested.
Enable auto reinvestment of dividends and capital gains distributions.
00:20:29 Return on Hassle
Evaluate whether the savings from switching accounts justify the hassle involved.
00:24:14 Charitable Giving
Donate appreciated securities rather than cash to avoid capital gains tax.
Utilize donor advised funds for strategic charitable giving.
00:33:01 Family Giving
Discuss the timing of financial support for adult children, focusing on "oops money" vs. "ooh money."
00:39:23 Maximizing HSA Contributions
Ensure contributions match the latest limits; check both individual and employer contributions.
00:41:38 Understanding IRMAA
Awareness of IRMAA’s impact on Medicare premiums and its effects in retirement.
00:43:02 Early Retirement Concerns
Don’t let health insurance costs dictate retirement timing; explore ACA options.
00:47:25 Retirement Order of Operations
Develop a strategy for tax-optimized withdrawal from investment accounts.
00:52:25 Holistic Wellness
Balance financial planning with mental health, relationships, and physical wellness.
Action Items:
Review asset location to minimize tax liabilities. (Timestamp: 00:01:50)
Enable auto reinvestment for dividends in your brokerage account. (Timestamp: 00:17:57)
Consider the hassle vs. savings when chasing high-yield accounts. (Timestamp: 00:20:29)
Maximize HSA contributions according to the current limits. (Timestamp: 00:39:20)
Explore charitable donations via appreciated securities instead of cash. (Timestamp: 00:25:27)
