Four Common Investment Mistakes That Can Quietly Cost
As an optometrist, you’ve got plenty to manage - patients, staff, your practice, and family. But what about your investments?
When new clients come to my firm, I often find the same issues in their portfolios. They’re not dramatic blowups - but they quietly drag down results over time.
Here are four of the most common mistakes I see optometrists make with their investments:
1️⃣ No Clear Investment Approach
Too often, portfolios look like a “junk drawer” - a random mix of funds collected over the years.
Some target date funds in this account, a few index funds in that account, a random industrial defense fund in another. There's no clear purpose or approach for why they're owned or how they work together.
Without a strategy, you’re not really investing - just collecting products.
A clear investment approach starts with:
- Evidence-based rules. It should be an approach that you have evidence will work long-term and that you can stick with.
- The right mix of stocks vs. bonds for your goals and time horizon.
- Consistency across all accounts going for that same goal.
For us, it's a "passive"-style investment approach. We believe markets work and set prices fairly well. We feel the academic evidence we have strongly supports an approach that is:
- Broadly diversified
- Keeps costs relatively low
- Tax efficient, and
- Doesn't rely on a manager's hunch or intuition on which individual investments will do better than all the rest.
This can be put to action using index funds or similar funds that "tilt" toward certain characteristics supported by research.
2️⃣ Thinking You’re Diversified (When You’re Not)
This comes in a few forms:
- Owning a lot of individual stocks or crypto
- Owning a lot of individual industry/thematic funds (like tech, industrial, healthcare, etc.)
- More commonly - owning a lot of funds that all invest in the same thing
Very often, I'll see a handful of mutual funds or ETFs that - when you look under the hood - all end up owning the same thing. Most of the time this is large US companies.
Unfortunately, owning more funds doesn’t mean you’re more diversified. It's really all about what's actually owned inside of the fund.
True diversification spreads across different industries, countries, and company sizes - and this can be done really well with as little as one fund.
3️⃣ Complexity for Complexity’s Sake
More complexity does not lead to better outcomes - it's often that simpler is better.
Particularly when coming from "XYZ" big financial company, I often see portfolios with 20–30 funds across accounts, even with very small dollar amounts. Many of them high-cost or overlapping, or without a clear purpose for choosing one vs. another.
It's often the case that these massive bundles of funds can be replaced with 1-5 or so funds that get to the same investment mix. Simply complexity for complexity's sake.
Or worse, clients are sold complicated products like buffered ETFs, indexed annuities or private funds that add fees without clear benefits. Too often, they are sold with claims of "market or better returns for less risk," but those claims don't often hold up to scrutiny.
Simple, evidence-based portfolios are often the better decision long-term.
I've seen that across wide ranges of net worths, you don't need to chase complexity to be successful. You can invest wisely, successfully, and simply.
If pitched complex products, please be very clear on what the purpose is - what goal/issue are they solving that you couldn't solve with a simpler option? And is that worth the costs, complexity, and risks involved.
4️⃣ Putting the Wrong Investments in the Wrong Accounts
Every account (401k, Roth IRA, brokerage, HSA) has different tax rules. And different investments (stocks, bonds, REITs, etc) create different amounts and types of income.
Placing the wrong investments in the wrong accounts (like bonds in a Roth or REITs in a taxable account) can create unnecessary taxes that compound against you over time.
This strategy - called asset location - is a subtle but powerful way to improve after-tax returns.
Consider all of the accounts going toward the same goal as one household mix - one big investment pie - and each account as just a slice of that pie.
Then, knowing your overall mix of stocks and bonds you're targeting, you can decide which accounts you'd want to put those into.
Some general guidelines:
- Pre-tax Retirement accounts - better for investments kicking off a lot of income, especially "ordinary" type income taxed at normal tax rates. Think most bond funds, REITS.
- Roth Retirement accounts - with a tax-free account, high-growth investments. Great for stocks.
- Taxable accounts - Income shows up on your tax return, so tax-efficiency is super important. You might avoid most bonds, REIT funds, or high-income investments like dividend funds. Better for broad, passive-style stock funds.
Why This Matters
Even small inefficiencies - higher costs, overlapping funds, poor tax placement - can quietly cost in return over your career.
The good news? With the right approach, your investments can be:
✅ Simple
✅ Diversified
✅ Tax-efficient
✅ Aligned with your goals
Have a great weekend!
Evon Mendrin CFP®, CSLP®
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