One of the Worst Investing Mistakes I’ve Ever Made
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When it comes to dividend investing, there are a lot of ways to mess things up. Trust me — I know, because in the handful of years I’ve been doing this, I’ve made plenty of mistakes myself.
And while I typically like to write about the investing strategies that work, I think it’s just as important (if not more) to talk about what doesn’t, and in my case, one of the biggest mistakes I made early on was not taking advantage of retirement accounts — specifically a Roth IRA.
In case you’re unfamiliar with this type of account, the biggest benefit of a Roth IRA is that you don’t have to pay taxes on your profits or your dividends when you withdraw them in retirement.
The catch, of course, is that you generally can’t withdraw those gains without penalty until you’re 59½ years old, and that’s exactly why I opted not to open a Roth IRA early on in my investing journey.
You see, my plan has always been to use my dividends long before 59½. So in my head, I figured that locking money away in an account I can’t touch would detract from my early retirement goals.
Fortunately, it didn’t take me too long to come to the realization that that way of thinking was a mistake. About a year and a half into my investing journey, it finally clicked for me.
No matter when I start pulling dividends, someday — assuming no crazy life events — I will be 59½. And hopefully, I’ll live for a long time after that.
During that time, I’m going to want as much tax-free income and as many tax-free gains as I can possibly get my hands on. After all, why wouldn’t I?
So even though I plan to start pulling some dividends sooner than the Roth IRA’s withdrawal age, my future self will still benefit from building up this tax-advantaged account today.
Also, what I eventually realized is that taxable accounts and Roth IRAs actually complement each other really well. While a normal brokerage account gives you the flexibility to tap into your wealth whenever you want, a Roth IRA lets you eliminate what would otherwise be a huge tax burden later in life, when your portfolio, profits, and dividends are likely much larger.
In other words, they each have their own strengths. And the goal shouldn’t be choosing one or the other — it should be taking advantage of both.
With all of that said, now I want to hear from you: What’s one investing mistake that stands out to you most? Write to me here and let me know.
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ICYMI 🎥
The HARD TRUTH About Income Investing
In this episode of The Deep End, we’re joined by Paul Santori for an honest conversation about the realities of income investing.
CAREFULLY CURATED 🔍
📺 Mindset Reset - A great reminder from Kevin Burgess that successful investing isn’t about being reactive — it’s about thinking clearer, longer-term, and more patiently than everyone else.
🎧 100-Year Thinking - Chris Mayer and Robert Hagstrom push back against the short-term noise we see today and unpack what it really means to think in decades, not quarters.
📚 Smart As A Rock - As we crank up our search for more powerful, lightning-fast AI, this Big Think article suggests we slow down and rethink what “smart” really means — resilience, adaptability, and longevity.
SINCE YOU ASKED 💬
“At what point does a dividend yield become suspiciously high?"
- Jack | YouTube
This is a great question, and there isn’t really a hard number where a dividend yield suddenly becomes “suspiciously high.”
To elaborate, a 5%, 6%, or even a 10%+ yield isn’t automatically a red flag on its own. Some types of businesses — like REITs, BDCs, or MLPs — are designed to pay out more of their cash flow to shareholders, so higher yields in those ranges naturally come with the territory.
Where a high yield might start to raise eyebrows is when it goes too far above a stock’s own historical average.
For example, if a company typically yields 2–3% and suddenly jumps to 4–5% or higher, that’s absolutely worth investigating. Most of the time, that kind of jump isn’t happening because the dividend per share went up — it’s happening because the share price saw a substantial drop, and you'll need to find out why.
Sometimes it's nothing, in which case a falling share price creates a great opportunity to lock in a higher-than-normal yield. Other times, the decline is happening because of an underlying issue in the business.
In other words, the yield itself isn’t the warning sign. The reason the yield is high is what actually matters.
Have a question? Ask me here to see it featured in an upcoming newsletter.
LAST WORD 👋
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