Comfort Zone Investing: If I Could Start All Over Again ...

So now I've reached the twilight of my investing career. I don't have as much time to make mistakes, especially expensive ones. Sometimes I think of what I would have done differently, to save myself a lot of grief and mostly, a lot of money. I'll share some of those mistakes and what I would have done differently.

First, I wouldn't have tried to hit the ball out of the park with every new idea that I saw, especially private deals that had no liquidity. I still would have invested in them, but with about 10% of the money. I remember investing in one company that literally had certificates waiting to be handed out to investors whenever they shelled out new money. A good, smart friend recommended the company to me. Total mess. It went bankrupt within months of my putting in $10,000. I should have put in $1,000 at the most because I really couldn't afford the $10,000 but I hoped this would be the big winner, the one that would make me really rich. It didn't.

Second, I would have saved more. The beauty of savings doesn't make itself known for many years, but when it does, it's a work of art. Not only are you able to rely on savings for unusual, extraordinary life events (they do happen, to everyone), but you can also add to them with interest payments. In today's environment, interest isn't worth talking about, but in a short while the inevitable, upward cycle of rates will begin and savings will pay more ... and more ... and more. Savings are one of the great sleeping aids.

Third, I would have done more homework on stocks I bought. My inclination was to buy first, then research. The stories sounded so good, especially the biotech ones, where the company was about to cure malaria or cancer or anthrax. But somehow those cures never came, and the money was spent. Then the company was gone. If I had been more knowledgeable about the medical aspect of each approach, I could have avoided many lost dollars. Also, even in areas where I know quite a bit, I should have been more thorough before committing to a stock.

Fourth, I would have had better diversity in my portfolio. While diversity will never get you the home runs I so wanted to experience, it would rarely let you strike out. Diversity diminishes the upside and dulls the downside. With several different industries and many stocks in each one, an investor can't put as much money into one stock that will sway returns significantly. That may bore many investors, but it keeps wealth longer and makes it grow slowly.

Fifth, I would have bought more bonds. Ironically, I spent quite a bit of my career on Wall Street on the bond side of the business, especially mortgage backed securities. I know they can be very rewarding. But I always wanted the excitement of stocks, the possibility of having a Google (GOOG) or IBM (IBM) or Amgen (AMGN) or Apple (AAPL). Turns out that when I did have a great stock, I sold it too soon, kept many losers too long, and never got the home run I wanted. Buying bonds as part of my strategy would have kept the portfolio growing with income every six months that could have then been re-invested for more income.

So if I could start all over again, I would do those five things, and many more, differently. The beauty is: it's never too late. And my portfolio is changing to better reflect the education the market has given me.

Ted Allrich is the founder of The Online Investor, chairman of the board of Bank of Internet USA, as well as the author of the book Comfort Zone Investing: Build Wealth and Sleep Well at Night. In this weekly column, he offers advice to investors who are just getting started.