1. Reaching for Yield – In today’s low interest rate environment, trying to get a higher yield through riskier bonds can carry significant risks. It’s also important to remember that low rates are creating a spike in the scam and ponzi market, so be wary of anyone promising you returns that seem too-good-to-be true.

2. Borrowing significant money for college debt – There are many ways kids can finance college, including working, going to a less expensive university, starting at a community college, etc. Don’t put your own financial future at risk to fund an lavish private university for your child.

3. Owning stock in your employer – I agree that you want to limit your exposure to the stock of the company you work for. You are already highly exposed to that company’s performance by virtue of receiving a paycheck from them. That said, if your company offers an attractive stock purchase plan, or you just really believe in the company, I think it’s prudent to limit your holdings to 10% of your total investment portfolio.

4. Taking Social Security too Early – Especially in today’s low interest rate world, delaying SS can be a great investment if you can afford it. SS payments increase 0.67% per month (8%/year) for every month you delay starting payments. 8% a year looks like a pretty attractive return in this market.

5. Buying Long-Term Bonds – with rates at historically low levels, locking in these yields for 10-30 years seems like a bad idea.

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One inexpensive way to take advantage of the compounding power of dividends is through Dividend Reinvestment Programs offered directly from a company. After an initial investment of between $50-500, you can buy shares every month with a direct transfer from your bank account, generally with a $25 minimum. Computershare is one of the largest managers of these programs, but other financial institutions offer then as well.

The basic premise is similar to how you can slowly buy shares in a mutual fund, but this allows you to invest in a specific company. Once a month, a direct transfer goes from your bank account to the program administrator and shares are purchased. For example, if you invest $100 a month into a stock with a $50 share price, you will buy 2 shares that month. If the share price is $75, you will buy 1.33 shares.

When the company pays a dividend, the proceeds of the dividend will buy additional shares. When you first start out, the dividend will likely only buy a tiny fraction of a share, but as you keep investing, those additional shares add up and then pay you a better dividend in the future.

I personally participate in four separate DRIP programs – Procter & Gamble (PG), United Technologies (UTX), McDonalds (MCD) and Southern Company (SO). Procter & Gamble runs its program directly and has no fees. The other three are administered by Computershare and the fees vary by company, depending on how much the company subsidizes the program.

DRIP programs can be a great addition to your after tax savings program.

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