Top 7 Beginner Investing Mistakes to Avoid at All Costs (and How to Fix Them)

Nowadays, with the stock market going crazy and certain sectors down 50% or more, there’s a lot of renewed interest in investing. And with good reason – opportunities like this don’t come around often. But just because everything is “cheap” doesn’t mean you can throw all caution to the wind.

In this guide, I’ll walk you through the top 7 investing mistakes that beginners often make, based on my own personal experiences and observations from teaching thousands of others. By identifying and avoiding these common pitfalls, you’ll be well on your way to building long-term wealth, even in the midst of market turbulence.

Mistake #1: Not Investing at All

The most prevalent beginner investing mistake I see is not investing at all. I get it – keeping your money in a bank account just gives this sense of financial and emotional security that nothing else can. But this is a huge mistake that can severely compromise your long-term financial future.

The problem with holding all your savings in cash is that it steadily loses purchasing power over time due to inflation. According to the Federal Reserve, the dollar has already lost over 50% of its value just within my own lifetime. This means if you have the same amount of cash now as you did years ago, everything costs you twice as much.

While having an emergency fund is important, relying solely on a bank account is a recipe for falling behind. You have to save your money and then invest it in order to outpace inflation and build real wealth. The volatility of the stock market may be unsettling, but it’s the only way to earn returns that can keep up with the rising cost of living.

Mistake #2: Not Having an Emergency Fund

Another critical mistake is not having a separate emergency fund before you start investing. Life happens – your car breaks down, you get sick, or you lose your job. The last thing you want is to have to sell your investments at the worst possible time just to cover these unexpected expenses.

This is exactly what happened to my family when I was a kid. After 9/11, my dad’s company shut down and we went months without any income. Since we didn’t have an emergency fund, my parents had to dip into my sister’s and my college investment accounts. Not only did we lose money from selling during the market downturn, but we also depleted our future education savings.

The general recommendation is to build up an emergency fund that can cover 3-6 months’ worth of living expenses before you start seriously investing. This gives you a crucial cash cushion to weather any storms without disrupting your long-term investment strategy.

Mistake #3: Waiting Too Long to Get Started

Another all-too-common mistake is simply procrastinating and delaying the start of your investing journey. Even when the market was doing well, it was still scary to take that first step. And now, with all the recent volatility, the fear and uncertainty can feel even more paralyzing.

However, the truth is that there’s never a “perfect” time to start investing. Trying to time the market and wait for the absolute bottom is a losing battle – no one can predict market tops and bottoms with certainty. All you’ll end up doing is missing out on valuable time in the market.

The key is to make a plan, do your research, and just get started. Investing doesn’t have to be complicated. Even small, regular contributions can compound into substantial wealth over decades. The most important thing is to overcome your fears and take that first step today.

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Mistake #4: Investing Too Much at Once

If you’re brand new to investing, start small and get comfortable with the emotional ups and downs of the market. Watching a $100 investment fluctuate is very different from watching a $100,000 portfolio do the same.

Investing too much money all at once can lead to impulsive mistakes like panic selling during market declines. Begin with a small, comfortable amount and gradually increase your investments as you gain confidence. Avoid rash decisions that can damage your returns.

Mistake #5: Not Investing Enough for the Future

On the flip side, many beginners don’t invest enough to achieve their long-term financial goals. For example, to retire with a $50,000 annual lifestyle and account for inflation, you’ll need a $1.7 million nest egg.

To reach $1 million in 15 years, you’d need to invest around $2,700 per month. In 30 years, you could get there with just $500 per month. The key is to start contributing a significant amount consistently, rather than relying on small roundup investments.

Mistake #6: Not Considering Taxes

Taxes will be one of your biggest lifetime expenses, so it’s crucial to structure your investments in a tax-efficient manner. Utilize tax-advantaged retirement accounts like Roth IRAs.

With a Roth IRA, you contribute after-tax dollars, but then all of your investment gains grow and can be withdrawn tax-free in retirement. Starting out with a taxable account instead can result in paying way more in taxes over the long run.

Download my Ultimate Guide to Investment Accounts to learn about what they are, which ones you need, and where to open them!

Mistake #7: Not Being Honest About Your Investing Style

The final common pitfall is not being realistic about how much time and effort you’re willing to dedicate to your investments. There’s a wide spectrum, from completely hands-off index fund investing to intensively researching and trading individual stocks.

Be honest with yourself about your investing personality and lifestyle. Find a strategy you can consistently implement, whether that’s index funds, robo-advisors, or a hybrid approach.

Start Investing with Confidence

The world of investing can seem overwhelming, especially during volatile market conditions. However, by avoiding these 7 common beginner mistakes, you’ll be well on your way to building lasting wealth.

The most important thing is to just get started. Don’t let fear or procrastination hold you back—take action today and your future self will thank you. Sign up for my Options Trading Masterclass to learn a proven strategy for generating consistent monthly income, even if you’re a total beginner. It’s time to take control of your financial future!