investing

6 financial experts and their worst goofs

Lesson learned: Leave the real estate flipping to the pros or the wealthy, and live within your means.

"Real estate is a great investment if you have the cash to buy it," he says. "I'm not against a mortgage for your primary residence. But if you plan to buy a second home or just buy and flip properties, you need to use cash. I had leveraged too much of my portfolio and the house of cards I built came crashing down."

Vicki Robin

Financial claim to fame: Co-author of "Your Money or Your Life" and Yourmoneyoryourlife.info.

Big money mistake: Robin had always been a renter. But when a friend who shared her basic values of independence, professionalism and sustainability suggested that the two go in on a house together, she jumped at the chance.

"It seemed like a slam-dunk," she says. "We'd each put in half. We had big visions for this place, and we seemed to totally align." Except that they didn't. Despite their many shared values, the way they planned to spend money on the house wasn't identical.

"She thought, well, we're going to share everything, and she started making big decisions for her area that she thought I was going to pay for," she says. "We were a couple of people who had been empowered and successful. We made our own decisions. But we were bumping into having to check in with somebody else about what to do regarding money."

How she changed: Smart, detailed communication turned out to be the key. "We were just making our own private assumption," she says. "But now we've established a shared agreement about what's mine, what's thine and what's ours," she says.

Lesson learned: In any financial partnership, whether it's your spouse or a business partner, be willing to talk about every last detail before making a commitment.

"We had had conversations (about money), and we both talked about what our values were. But we didn't hear what the other person was saying," Robin says. "Too often people's values are aligned, but their strategies for enacting their values are different."

Brian Preston

Financial claim to fame: Host of the Money Guy blog and podcast, and a certified public accountant, Certified Financial Planner and personal financial specialist at Preston and Cleveland Wealth Management LLC in McDonough, Ga.

Big money mistake: Preston graduated from college in the mid-'90s, when the Internet was changing the world. He was convinced he could ride the boom and make some serious cash, so he took $2,000 and looked for the sure winners.

"I decided that it would be a great idea to invest in several Internet mutual funds," he says. "I doubled my money within six months and thought I was a financial genius." He topped out at $6,000, but then slid back when the bubble burst. He didn't get out until his original investment had dwindled to a measly $400.

How he changed: Preston returned to personal finance fundamentals -- a view he preaches on his twice-monthly podcast. "A low-cost, broadly diversified portfolio is much more consistent in performance, and it allows you to sleep better at night," Preston says.

Lesson learned: Nobody can foretell the future, and today's top stocks are often tomorrow's dustbin liner. "I have learned that chasing sectors and the current hot investment trend is not a fruitful endeavor," he says.

Jonathan Clements

Financial claim to fame: Author of "The Little Book of Main Street Money" and former Wall Street Journal columnist.

Big money mistake: Years ago, Clements got an $8,000 windfall when his father liquidated a life insurance policy, and he decided to try his hand at stock-picking. He chose four. Two did well, one broke even and one was nothing short of disaster.

"It seemed like a clever investment," he says of that last stock. "The company was a cinema operator that had also amassed a series of investments, many of them in Internet companies. A little math indicated that, on a per-share basis, this investment portfolio was equal to the parent company's stock price, which meant you were effectively getting the cinema operation for free."

His brilliant strategy proved to be less intelligent than he thought. The stock's value plunged by 90 percent when the tech bubble burst, and the cinema operation didn't fare much better. "A year after I bought the share, I bit the bullet and took my tax loss," he says.

How he changed: Clements is done with cherry-picking stocks. "I haven't bought an individual stock since then," he notes.

Lesson learned: "Be leery of excessive self-confidence," he says. "We all like to think that we're smarter and more knowledgeable than others. But it's awfully tough to outsmart the market."

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