If you're like me, you're trying to avoid dumb investing mistakes. Investing can often be complicated enough as it is...right?
We all are looking to invest and save for our futures.
Saving is always in the back of our minds, but whether you actually do it…well that’s another story for many people. Most of us want to save for retirement, but our other debts and expenses are always getting in the way!
Saving smartly is harder than it sounds. Ideally, we want our savings to work hard for us (work smarter, not harder)! So, we try to invest wisely in the right mix of assets, but we often fall down on that task.
Here are 10 dumb investing mistakes:
1. Not investing
The biggest mistake people make is not investing at all.
Quit wasting time and making excuses! Don’t wait for that raise, inheritance or lottery win. Start today, right now, with whatever amount you can. In fact, since I’m such a nice guy, I’ll gift you 2 FREE STOCKS valued up to $1,400!
Consider this: If you can save $150 a month — that’s only about $5 a day — for 30 years and earn 7% on it, you’ll end up with around $170,000.
That’s enough to improve your life and the lives of those you love.
If you can’t afford $5 a day, start by downloading the budgeting and savings app Acorns.
Acorns is an app that allows you to invest your spare change automatically so you don’t have to worry about making lump-sum contributions.
Rather, you can invest 10 cents here and 12 cents there. It may not sound like a lot, but trust me, you’ll save up hundreds of dollars in no time!
The best part is that your money is automatically invested in the stock market based on your risk tolerance.
I’d highly suggest downloading the free app and creating an account today. You get $5 using the link below.
2. Being impatient
You have to understand that investing in the stock market is a long-term play. You can’t expect to make a killing overnight and you can’t expect consistent results when you’re day trading.
Start investing today once you’ve saved an emergency fund of 3-6 months’ worth of expenses. Once you’re invested, plan more of a set it and forget it type strategy.
Don’t sit up at night worrying about how much you’ve made or lost. The market always goes up over time and if you’re invested for the long haul, you’ll be fine.
3. Investing before doing your homework
Just because you like a company doesn’t mean they are a good investment. Do your due diligence and educate yourself before throwing your money down and praying.
Don’t invest without a clue. If you’re thinking about stocks, there’s plenty of research and other information available online for free.
We live in a world today where you can find pretty much anything you need online…for FREE!
4. Not diversifying
Investing in stocks involves what’s known as market risk: If the entire market tanks, your stocks probably will as well. It also involves company risk — the risk that a specific company will do poorly.
Having a diversified portfolio is crucial to your success. I’m sure you’ve heard not to put all of your eggs in one basket.
One area outside of the stock market I like to invest in is real estate. If you can buy a rental property that cash flows every month and builds equity, well now you’re sitting good!
Another easy way to diversify outside of individual stocks is to own mutual funds. A mutual fund allows you to own a slice of hundreds of companies.
Even better yet, invest in exchange traded funds (ETF’s)!
5. Taking too much risk
Everybody wants to double their money overnight. But if you’re always swinging for the fences, you’re going to strike out more.
Ask some of the biggest swingers in the major leagues, for every home run they hit, they’ll likely strike out 5 times!
Although that home run sure feels good 😉
Make sure you understand your risk tolerance and time horizon. You also want to have some goals of what you’re trying to obtain.
If you’re 55 years old with limited investment experience, you shouldn’t be invested aggressively like a 25-year old would be.
No matter your age, if you don’t have any investing experience or knowledge, forget commodities and crypto. It’s a hard NO for most people, especially those that don’t like roller coasters!
6. Not taking enough risk
On the other side of the same coin, some investors stand like deer in headlights, unwilling to take even a measured amount of risk.
Instead, they keep their savings in insured bank accounts, earning peanuts in return. (Actually, I could go for some baked cinnamon peanuts right about now)!
If you’re under 40 years old you should be invested heavily in stocks. Your allocation should be at least 70% stocks.
Don’t be the guy hiding your money under your bed…
Savings accounts are a safe bet to invest all of your money. By safe bet, I mean a safe bet that inflation will exceed the interest you make over time.
In other words, you’ll become poorer over time...
7. Getting greedy
The first time you make money investing, you will be hooked. Really, with anything that you see success at for the first time, you’ll likely become somewhat greedy or addicted.
This is how the casinos get ya! Don’t be greedy with anything in life. Remember, don’t go too fast down the hill or you’ll fall and end up much worse than before you started.
8. Paying too much attention
There is such a thing as information overload. Especially in this industry where there are gurus everywhere telling you how to invest and begging you to buy their courses.
Speaking of that, today is your lucky day because my course is 95% off today for a limited time so make sure that you buy it.
I’m obviously joking as I don’t sell courses, but I hope you enjoyed my lame humor!
Step back, look at the big picture and find a few financial journalists or others whom you trust. Then, tune out the rest.
I would love to be one of your free resources and help you out as much as I can!
9. Being overconfident & arrogant
The economy runs in cycles of boom and bust. When times are good, people often confuse luck with skill.
This type of behavior will get you knocked out in a fist fight just as it could be detrimental to your portfolio.
Always keep in the back of your mind that when others are greedy, you should be fearful.
The stock market is a unique game where you often shouldn’t follow the sentiment of most people.
Such misunderstanding arguably played a role in what happened during the housing bubble and the dot-com bubble that preceded it.
Being in the right place at the right time isn’t the same as being smart.
10. Failing to adjust & evolve
How you invest should change as your life changes.
When you’re young, it makes sense to invest aggressively, because you have time to recoup from mistakes and market downturns.
As you approach retirement age, you should reduce risk within your allocation.
This is why many financial advisors get paid the big bucks because they will help you adjust your portfolio as the years go by so you can worry about your own career and family.
If you’re not working with an advisor, you should at least rebalance your portfolio once a year depending on your age, risk and how the market is doing.
I hope you’re able to pull at least one thing out of this article! Now, incorporate it into your investing life.
Don’t fall into the “dumb” category my friends!!