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I think a SIPP can be a great way to try to build wealth before retirement, which is why I invest in one.
But while I hope a SIPP can help me make money, some mistakes along the way could also cost me costs.
Here are four mistakes I hope to avoid in 2025 (and always!)
Ignore 'small' costs
Different SIPPS come with their own cost and fee structures.
As the amount of a SIPP grows, such costs may appear to be a fairly small proportion of the amount invested. But it is important to remember that a SIPP is a long-term investment vehicle.
While 1% or 2% (or even 0.5%) may not seem like much this year or next, over the course of three or four decades a small annual tax can add up. enormous amount.
So I'm paying attention right now to whether my SIPP provider offers me good value for money.
Lack of investment strategy
Another mistake I try to avoid is investing without a strategy.
It doesn't have to be a formal plan. It doesn't have to be complicated. But I think it's important to sit down and think about how I hope to increase the value of my SIPP.
For example, what is the right balance between growth and revenue share? How much of the SIPP do I want to invest and how much will I keep in cash at any time (if any)? Are markets outside the UK potentially more attractive to me?
What I want to say here is not about the details of my strategy, but instead of developing an approach and adapting it on the fly, I hope to try to miss some avoidable mistakes.
For example, I wouldn't want to miss a big rise in growth stocks because I'm 100% focused on dividend stocks.
Not diversifying enough
That brings me to another mistake: not spreading a SIPP across enough shares.
As the most experienced investors know, even the brightest stock can suddenly plunge unexpectedly.
This hurts financially, but even more so if your role in a SIPP is too large relative to other holdings.
Don't learn from mistakes
It's easy to delight in big investments. But what about the bad ones?
Many of us like to forget about them. But I think that can be costly, as it means we could make similar mistakes in the future.
For example, one of the worst performers in my SIPP is boohoo (LSE: BOO). From MFI to Superdry, I've had my fair share of terrible retail stocks. Therefore, although I continue to invest in the sector, I am cautious.
What was my key mistake with bohoo?
I think one was ignoring the market signal: a massive drop in price before buying was not the bargain one was expecting. Rather, it was other investors who signaled lower confidence in the retailer's prospects.
I thought past profitability equaled a proven business model. But – and I know – past performance is not necessarily a guide to what will happen in the future. Competition from companies like Shein dramatically changed the boohoo market.
I still own the shares and hope boohoo's large customer base and strong brands can help it recover. But I have learned a hard lesson!
