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We all make mistakes. Some more than others.
In the world of investing there’s no shortage of jagoffs who want you to make more mistakes than others. And they actively work to trip you up every chance they get cuz they profit big time when you do.
So in our ongoing attempt to help you build your own nest egg instead of help some Wall Street huckster make their next yacht payment, here’s a list of major (and costly) investing mistakes you want to steer clear of…
Paying High Fees to Brokers, Advisors, Fund Managers, etc.
Fees kill investing returns. Period.
Depending on how much you invest, this could add up to $1000s, $10,000s or more over the course of your investing lifetime. That’s money going into someone else’s pocket instead of funding that dream vacation, early retirement, college education, etc. you’ve been slogging so hard for.
Some ways to avoid these fees include investing in low cost index funds, not paying fees for buying/selling stocks and learning simple investing strategies you can do yourself instead of hiring high priced investment brokers / advisors.
Not Having an Investing Strategy
Investing without a strategy is like eating a burrito that’s been festering in your fridge for a year. It ain’t gonna end well for you!
Yes, you can change your strategy over time but you always need to have one. Here’s an article on common investing strategies to get you pointed in the right direction.
Investing With Money You Can’t Afford to Lose
Make sure you have enough in the bank to cover your nut (or rent, car payment, groceries, etc.) for AT LEAST 6 months before you start investing.
Yes, the promise of making lots of money in the market is a powerful one. But don’t jump into the world of investing thinking your gonna dig yourself out of a financial hole by beating the market. Cuz, in the beginning, you should count on losing money in the market which will only make the hole go deeper.
So make sure that money you put in the market is cash you can afford to lose without cramping your lifestyle.
Investing With Borrowed Money
This is even worse than investing money you can’t afford to lose. Never ever borrow money from the bank, a friend or family member, loan shark, Great White Shark, Jabba the Hutt, etc. to invest in stocks.
Never. Ever. Just don’t do it.
Ever.
Capisce?
Not Diversifying
Ever hear the saying “Don’t put your eggs in one basket”?
That definitely applies to your nest egg.
Diversify your investments across different stocks and asset classes (ie. stocks vs bonds vs gold).
Buying on the Dip Instead of on New Highs
This is one of the more common investing mistakes people make.
You’ll hear a lot of investors talk about “buying on the dip”. This is when a stock price takes a hit and they think the shares are “cheap”. So they buy the stock thinking it’s a bargain and they’re gonna cash in when the stock rockets back to where it was.
Sorry Chuckles, but it usually doesn’t work that way.
You know what the most successful investors do? They buy stocks that are making new highs. (Especially when the stocks hit those high on high trading volume.) That shows strength in the stock.
See, many stocks that take big dips never recover. They tanked for a reason!
But the most successful stocks in history hit new high after new high on their way into the stratosphere.
Short Term, Frequent Trading
We’re not big fans of day trading here, especially for newbie investors. We won’t rehash the reasons why here. Just read our article that lays out the truth about day trading.
Trying to Time the Market
Professionals with decades of experience can’t do this well. So just don’t try. For most folks, your best bet is sticking with a buy and hold strategy.
Blindly Taking Advice From the Wrong Peeps
Repeat after me…
“I will not buy/sell a stock based on the advice from random morons on Reddit or Twitter.”
“People selling hypey, high priced investing services, training, etc. may not have my best interests in mind.”
“I will not listen to stock rumors from my day trading 30 year old cousin who still lives in my aunt’s basement.”
Not Knowing Your Goals
Investing for retirement in 40 years is different than investing for retirement in 5 years is different from investing for a home you wanna buy in a few years. Know what you’re investing for and choose a strategy accordingly.
Letting Emotions Rule the Day
Easier said than done for sure. In fact, this is probably the hardest of these investing mistakes to avoid. But emotion will destroy your investing returns more than anything else.
You’ll never totally eliminate emotions from investing. But you can minimize their impact by educating yourself (even on just a basic level), picking a strategy and then sticking to it AND the investing rules you have in place to support that strategy.
Do that and you’ll come outta the investing game in better shape than most.
