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This was the biggest financial mistake of my life. Do not repeat it

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Investment regrets — I’ve had a few. I remember pouring money into the Aberdeen Technology fund in March 2000, days before the dot.com meltdown. For diversification, I invested in Aberdeen European Technology. Tech stocks crashed, I burned.

Heartache pass

In December 2008, at the height of the financial crisis, a contact urged me to buy car dealership Pendragon when its share price had slipped to 1.28p. The following August he urged me to sell at 30p, when it had turned into a 23-bagger, and asked if his tip had made me rich. I shamefacedly admitted that I’d failed to act on his ‘buy’ advice.

Those are the first mistakes that spring to mind… and I’ve made more. I have put them behind me, thanks for asking, but there’s one decision I do still kick myself over, because it was plain stupid. Don’t be daft like me.

In 1988, at the age of 22, I got a job working for a publishing company that had a money purchase workplace scheme for junior staff like me, and a final salary plan for more senior ones. I was given the chance to join and said… no thanks. I took the extra cash in my pay packet and spent it on Guinness, mostly, and I don’t even particularly like Guinness. I was more of a bitter man (I certainly am now).

Old man’s regrets

My excuse? It was the 1980s, I’d just left university and thought pensions were a Thatcherite plot of some sort. Or maybe just a bore. Also, I didn’t expect to be at the publishing company more than two years. Eight years later, I was still there. I was 30 years old, had been working away for years, but had no pension. I belatedly joined, then endeavoured to play catch-up by investing in personal pensions and ISAs as well.

Turning down the opportunity to join a company pension is irretrievable because those early contributions are the most important you will ever make, as compound interest has decades to work its magic. Let’s say that an average of £75 a month would have gone into my pension. Markets were booming at the time, so if my plan had grown at an average 7% a year, I would’ve had £9,880 after eight years.

Never forget

Which wouldn’t exactly make me a pension millionaire, but that money would have since had another 22 years to grow. Assuming slightly slower average annual growth of 6% since, it would now be worth £35,603. If I left it untouched for another 16 years, until I turned 68, it would be worth £90,444. That could buy me a lot of Guinness, or rather, craft IPA, my tipple of choice today. That would go a fair way to topping up today’s dreadful State Pension.

So if you’re offered an employer’s pension scheme, don’t opt out. Then build up a separate pot of shares or funds in a personal pension or ISA. Otherwise you WILL regret it later, and for the rest of your life. Trust me on this.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.