Financial advisors may know a lot of things about wisely spending money, but they don’t know everything. Even the best educated, most experienced and all around savviest financial expert is still, at the end of the day, a human being trying to make the best decisions based on the information they have on hand.
Sometimes, these advisors regret their decisions in hindsight. And sometimes, looking back on the purchases they regret the most will teach the experts in a more intimate way than they’d get in their studies or on the job.
GOBankingRates talked to some financial experts about the purchases they most regret and what they now wish they’d purchased instead.
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Investing In a Startup
As the co-founder and CEO of Reliant Insurance Group and Helping Hand Financial, Ben Klesinger is a seasoned financial professional. But that doesn’t mean that he didn’t have to acquire some of his expertise the hard way by making investments he would come to regret.
Early in his career, Klesinger invested heavily in what he called “a promising but unproven fintech startup.” Citing generally high levels of enthusiasm for technology, he put in about $200,000 of his own capital. Though he expected to see quick returns, what he got was a whole lot of headaches.
“The startup struggled with regulatory issues and market competition. In the end, we lost nearly the entire investment,” he said. “I learned the hard way that even if a business idea sounds revolutionary, proper due diligence is indispensable.”
In hindsight, Klesinger wishes he’d applied a more balanced approach, like investing in a diversified portfolio of mutual funds or even tech-focused ETFs, which would have allowed him to get exposure to the tech sector without taking on such a high risk.
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A Fancy Car
Like many people who have worked hard and want to show off their success, Klesinger once purchased “an extravagant car” that he also hoped would serve as a solid investment. Unfortunately, that car which cost him $150,000, ultimately proved more trouble than fun by depreciating much faster than he anticipated.
“The maintenance costs also piled up, diminishing the overall value,” he said. “I realized afterward that investing the same amount in rental properties or a mix of dividend-yielding stocks would have generated consistent income and appreciated over time.”
Real Estate
John Pace, certified public accountant (CPA) and tax partner at Pace & Associates, CPAs, has over 40 years in the tax advisory and real estate planning field. He said his experience has helped him see how the decisions that individuals and businesses make can impact their financial health — and he’s no exception himself.
“One of my most regrettable purchases was investing in a highly speculative commercial real estate venture early in my career,” he said. “We sank about $500,000 into a poorly-vetted project, only to see it fail within two years.”
Pace later realized that he’d overlooked performing critical due diligence, such as thoroughly analyzing the market demand and obtaining reliable financial projections.
“Instead, I wish we had diversified our investment portfolio by placing those funds into a mix of low-risk bonds and blue-chip stocks,” he said. “This would have provided steady returns and reduced our exposure to risk.”
Vacation Properties
Another learning experience for Pace would come with the purchase of a luxury vacation property. He spent a large sum on the property, hoping it would prove valuable in terms of personal enjoyment and a lucrative future sale.
Unfortunately, reality crept into the dream property in the form of maintenance costs and the property’s underperformance in the rental market — which turned it into a financial drain.
“Instead, we would have been better off investing that money into low-cost index funds, which historically offer more reliable returns and require far less ongoing expense,” he said.
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This article originally appeared on GOBankingRates.com: 4 Purchases Financial Experts Regret and What They Wish They Had Spent Money On
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