7 Common Investing Mistakes For Beginners To Avoid

About to begin your investment journey? We want you to use compound interest to your advantage to grow your wealth and not stumble on well-known investing mistakes. Learn these common investing mistakes to dodge the bullet and avoid learning them the hard way. Becoming a new investor is exciting, but watch out for these frequent missteps! Here are some helpful tips to dodge those rookie errors in your investing journey!

Common Investing Mistakes

Mistake #1: Putting All Your Eggs in One Basket

One of the most frequent errors among beginner investors is picking one thing and putting all their money into it. This increases the investor’s risk because 100% of their portfolio relies on one stock’s success or failure. It is so important to diversify your investments! Don’t bet everything on a single stock or asset. Spread your investments across different industries or sectors to minimize risk.

Mistake #2: Letting Emotions Drive Decisions

Investing isn’t a rollercoaster ride. Don’t let emotions like fear or greed steer your investment choices. Stay rational and focus on your long-term goals. The most common and worst emotional investing decisions are based on FOMO. Fear of missing out should never be why you take a so-called ” hot stock tip” and invest in something without understanding or researching it.

Mistake #3: Ignoring Research

Investment isn’t a blind leap. Conduct thorough research before diving in. Understand the market, the company, or the asset you’re investing in. So many people on TV and the internet are trying to convince you they know what stock will go to the moon, but they are just as likely to be wrong as you are. You can visit reputable sources and the company or fund home page for the prospectus and company information. Follow unbiased third-party researchers and learn how to research stocks yourself.

Mistake #4: Overlooking Fees and Expenses

Investment fees are sneaky, and beginner investors almost always overlook them because you don’t pay them upfront; they are taken from your investment gains over time. High management fees or hidden charges can eat into your returns to the tune of hundreds of thousands of dollars over your investing lifetime. So be sure to choose investments with reasonable fees, and if you don’t understand the fees, always ask!

Mistake #5: Timing the Market

Timing the market means attempting to pick the best time to invest based on whether the market is going up or down. Unfortunately, there is no crystal ball to tell us these secrets, and your guess is as good as mine, so don’t try to predict short-term market movements. Investing regularly, or in a lump sum, whenever you have the money to do so, is the best approach. Invest for the long haul, and even though it’s really hard, try not to worry about the stock market going up and down in the short term.

Mistake #6: Neglecting Emergency Savings

Investing is crucial, but don’t put it ahead of an emergency fund. Lots of new investors make this big mistake. Jumping into investing before you have a financial safety net to protect you when emergencies happen is a big no-no. Before diving into investments, ensure you have that emergency fund in place. The last thing you want to do is have to pull out your investments to cover an emergency.

Mistake #7: Failing to Reassess

Make sure you regularly review your investments. Monitor their growth, your investments, fees, and investment methods. Your goals and circumstances may change over time, and so should your investment strategy. Set it and forget it is generally a good rule of thumb for investing, but set yourself regular check-ins so you don’t overlook issues that might occur

Learn From These Beginner Investor Mistakes

Remember, everyone makes mistakes, especially when starting their investment journey. The key is to learn from them and keep moving forward. Hopefully, you can learn from these 7 common mistakes, and you won’t have to make them yourself! Want to check out how investing can help you reach your long-term goals? Head to our Retirement Calculator and plug in your numbers! Happy investing!