Many people can end up falling into I’ve made many of these mistakes in the past and it’s important to understand how these work and how you can prevent these so that you can save a lot of money in the process so let’s not beat around the bush let’s just get right into this post but if you are new here to the website and you want to learn more about personal finance saving money making money if you find any value in it so let’s get started here let’s talk about the one of the first mistakes that so many people make and this is a very very common this is something that I was susceptible to when I first started investing and it was essentially not understanding the difference between gambling versus actual investing and see I think a lot of people when they start and maybe this isn’t you but I know for myself when I started investing I was really sort of speculating rather than making logical investments based off the statistics and based off of numbers but rather looking at my emotions thinking about how much money I could make in thinking about the so a hype of a certain product or a stock or a company that you might be investing into so that’s one of the first tips there to make sure that you understand the difference between speculation and investing and see the whole purpose of investing is to minimize as much risk as possible while at the same time maximizing as much return as possible that’s the whole point of that so we want to be very careful with that and there’s a lot of different books that we could recommend for investing one of the best ones of all time that I would say is one of the best is called the intelligent investor and actually the first chapter in this book we won’t go to into detail if you’re interested in it but it’s one of the best-selling investment books of all tim.e
so if you’re looking to get started investing you want to learn a lot more about it check out that book the first chapter I I believe is called speculation versus investing in the difference between those and to make sure that you’re falling into the right category rather than speculating so that’s the first one there let’s talk about the next one which is paying too many fees paying too much in fees for investments see back in the day you used up the call up your stockbroker and say hey I want to sell I want to buy or go into your financial institution to buy and sell stocks or investments or mutual funds then it comes changed to sort of you saw etrade or TD Ameritrade where you may be paying $10 for every time you’re buying or selling stocks but now we’ve entered sort of this new phase where essentially investing should be free in terms of fees so one of my favorite brokers to use is m1 finance there’s not really I do have an affiliate then I would suggest checking out and one finance they’re a wonderful company I really don’t promote very many companies on this website because the truth is I don’t like all of the brokerage companies but I have to say m1 Finance is one of my favorites they’re very reputable and it’s a company that you can use to invest into the stock market for free so if you’re paying too much in fees look at how much you’re paying not only with buying and selling stocks or ETFs or mutual funds but also look at these rates that you’re paying for these mutual funds or ETF so there’s something called an expense ratio on these different funds so you might see something where it essentially costs you one percent or half a percent for someone to manage this fund for you we’re talking specifically about mutual funds and ETFs and index funds of some sort might have some type of expense ratio or fee that they might have on their a management fee I would try to not pay too much in fees.
I really don’t like to have expense ratios or those management fees anywhere above a quarter percent half a percent obviously there’s some funds that do take a lot more effort a lot more work going into them actively managed so they could require higher fees but generally speaking I really try to avoid as many fees as possible when it comes to investing so check out m1 finance if you’re not interested in them you can also use Robinhood they also offer free trading as well and if you do not mind paying $10 for a transaction fee then you could look at some some of these other ones but times are certainly changing and our deathly consider getting one of these apps that makes it so much easier to buy and sell stock so let’s talk about the next one here which is investing money that you cannot afford to lose this is incredibly important and look you know I have to say I’m not a financial advisor here this is just free information so you need to make sure that you’re doing your own research but investing you can’t afford to lose this is a very terrible mistake that’s so many people making what we’re talking about here is either your borrowing money to invest in the stock market because you think you can make a lot of money which maybe you can but in some cases you might not and if you’re borrowing money buying on margin we call it we’re borrowing borrowing money from someone else so that you can invest terrible terrible decision in most cases so you should not be investing the money that you need for next month’s rent that you absolutely need to pay your bills you shouldn’t be investing that money all of it into the stock market thinking that you can double that money and then pay off your rent in the future or pay off your credit card bills with the money that you’re investing.
if you have a lot of debt if you’re swamped in the high interest debt like credit card debt or personal loans anything in the double digits in terms of interest rates then you might want to consider paying that all first or at least and getting a hold on that before you start investing into the markets I think that’s one of the worst positions that people can get in once they start to find themselves in debt and they say what’s a great way to get out of this maybe I can invest into penny stocks or invest into these hot stocks that I heard but you know in an elevator somewhere that somebody told me about it’s gonna blow up tomorrow I’m gonna grow 400% tomorrow I can take this money from the stock market that I make and then pay off my credit card bills pay off my debt that is not a good plan it’s almost always going to be putting you in not only a very stressful position but something that can end up really hurting you in the long run so make sure you are limiting risk to maximize your reward by not investing too much money money that you cannot afford to lose now if you’ve already got your expenses covered if you’re able to pay for your rent you’re able to pay for your electricity bill and your car payment and maybe some of your credit card payments and you want to start investing into the stock market then that can be a great option and that’s actually kind of leading us into the next point here which is a mistake a mistake that people make which is that they end up waiting far too long to start investing into the markets and so I’m gonna kind of spin you around here because we just said that you want to be careful that you’re not investing money that you cannot afford to lose but I also want to mention that look I think it’s important for everyone if you are interested in growing wealth over your lifetime to consider getting your feet wet in the markets even if you do find yourself in a position where you don’t have a lot of money at the moment even.
if you do have some debt I think it’s a great idea to get your feet wet and when we’re talking about this we’re talking five dollars a week ten dollars a week invested into the markets so that you can sort of get a better understanding because one of the best ways to learn about investing whether you’re investing into bonds or CDs or the stock market or real estate one of the best ways to do this besides reading books and learning free information like this post is to actually have the experience to actually try things possibly fail possibly win but end up over the long term gaining a lot of wisdom when it comes to the markets the longer you are investing the more you learn the more mistakes you make but then the more you learn from those mistakes and you don’t make them again and it makes you a much better investor from what we’ve found so that’s something that you do want to consider just getting started very small and and we’re going to leave it in the next one here the next point which is a mistake people make is by trusting experts too much okay so we’re talking about stock market gurus people on forums even people who have website who were telling you to buy this stock or sell this stock I think that’s something you want to be very careful of and we can even go on top of this and say you know even a very notable investors even say Warren Buffett if you see in the news that Warren Buffett is buying American Airlines or he’s buying Southwest Airlines stock or he’s selling Apple stock you shouldn’t necessarily be buying or selling something just because a very good investor at the top is doing that as well because in some cases.
they can be wrong and they might have a winning track record but you really want to think for yourself and try not to follow the crowd too much but rather make sure that you are able to understand the logic behind it rather than just following other people but be very careful of these investors or or these experts that you might see who are trying to sell you some type of program or some type of thing where they’re trying to get you to buy into penny stock so they can pump them up and then dump them pumping and dumping it’s a big scheme used to be around a lot more during the dot-com bubble but it’s still very prevalent people are pumping and dumping all the time you want to be very careful of it so the last mistakeby trying to time the market now I think there is certainly something that is nice to be able to sort of look at the economic cycle and say if we’ve been going up for ten years that we’re probably going to see some type of economic downturn or a recession in the next year or two or three but I think the problem really comes in when people trying to time the market too much to the point where they end up missing out because they end up never investing they say well you know it’s it’s 2012 we had a recession a few years ago but I’m worried that we’re gonna enter another recession so I’m gonna wait I’m gonna wait until the market goes down further and then I’ll start investing and then 2013 happens they say the same thing 2014 2015 2016 we’re all the way up in 2019 almost 2020 and people are still holding off waiting to invest into the market for the perfect time which is very difficult to actually predict so for myself and like I said guys I’m not a financial adviser but for myself personally what I like to do is I like to do some dollar cost averaging where essentially I’m smoothing it out so that I’m investing in times where we’re in good economic times but also poor economic times.
so that really smoothes out the curve so I’m really growing my assets over the long-run now you also want to understand that regardless of where the economy is at the moment there are going to be companies that are performing very well and companies that are not doing very well this happens even during the worst economic times you look at 2008 2009 a lot of companies in the United States were performing very poorly we were going into this economic contraction but there were still companies that were doing very well look at Dollar Tree look at Walmart there were companies that were doing very well bringing in record-breaking numbers of revenue during very hard economic times and at the same time you can look at companies now in 2018 2019 2020 that are performing very poorly during a very good economy so try to find companies that are valuable that are within this mix and it’s it’s getting more difficult to do that as the markets are rising but they still do exist you can find an undervalued company in any market in a high market in a low market.