What are the biggest investing mistakes to avoid?
Investing can be the best way to build wealth, but there are a few things to keep in mind in order to avoid making some huge blunders.
This post is about investing mistakes.
1. Choosing the Wrong Brokerage
The brokerage matters, especially when you want to invest in certain funds.
For example, if you want to invest in Fidelity’s index funds, but only have a Robinhood account, you’ll end up either paying a premium to invest in Fidelity’s free index funds or you’ll lose out on the opportunity to invest altogether because Robinhood doesn’t have them available.
Similarly, if you try to invest in Fidelity’s index funds with a Vanguard account, you’ll end up paying a premium to invest in Fidelity’s free index funds.
This is only one of the many investing mistakes.
2. Timing the Market
It’s not about timing the market, it’s about time in the market. This post goes in depth the importance of growing your money based on your time in the market.
Investing is about long-term growth, so the money you put into an investment, you shouldn’t need for a long time. The general rule of thumb is ~5 years.
3. Not Diversifying
Being too concentrated into any single investment means a significant portion of your wealth is dependent on that single investment.
What if that stock crashes and doesn’t recover for another several years? Not a situation you’d want to be in.
Therefore, it’s always advisable to diversify your investments, so your wealth isn’t entirely dependent on one investment.
4. Fees, fees, fees.
This relates to the first bullet where you need to watch out for hidden fees.
What this looks like is the 0.25% your robo advisor takes to invest into funds for you. 0.25%, that’s nothing!
That percentage may seem small; however, keep in mind the fees you’ll have to pay before you get your cash back: taxes, brokerage fees, fund fees.
One of my favorite things about Fidelity is that they offer numerous index funds at low or no cost.
5. Not Understanding the Investment
Following people’s investment advice without doing your own research.
Don’t get me wrong, there’s a lot of great, accessible education out there with substantial knowledge; however, investing includes some level of risk.
Therefore, it’s always advised to do your own research. At the end of the day, you’re investing your own money, so be prepared.
