You can have an advantage in the market. All you have to do is break away from the crowd. Everybody focuses on “how much money can I make from this stock”. Few look at the other side. Like “how can I avoid wrong investing moves”.
So by reading this article you are getting a leg up. I’d like to tell you a quick story.
There’s a guy out there outside the investing world called Tim Ferriss. Ever since he was a little boy, Tim had been good at standing out from the crowd.
When he was a little boy, Tim almost failed kindergarden. He absolutely refused to learn the alphabet. When he asked his teacher why they had to learn it, the teacher wouldn’t give him an answer. I’m the teacher so what I say goes.
Tim didn’t like that answer. So he continued to rebel. That got him a bar of soap in his mouth and a seat in the timeout table.
His rebellion continued when he got fired from his first job 8 years later. His boss didn’t like to hear how the business was so inefficient and that Tim had a better and smarter way to run it. Rightly so.
How did the rest of Tim’s life pan out?
He went on to attend Princeton, drop out. Travel the world, learn over 15 languages. Learn the Tango, and set a Guinness World Record 8 weeks later. Become a world champion kick boxer, in just weeks. Then a multiple New York Times bestseller, a value investor, and millionaire entreprenuer.
Well isn’t he just the superhuman.
It’s his ability to stand out from the crowd that drives his success. He’s able to think out of the box, and think independently. He talks about the minimum effective dose (MED), which is crucial to him learning a new skill in just weeks.
And guess what? It works just the same with investing.
You can profit immensely by challenging the status quo. Everybody wants to talk about profits and gains. Do you know what will really help you understand the field?
Look at bankruptcies and failures. Focus on what investors do wrong.
By taking the road less traveled, and focusing things the crowd doesn’t think to focus on, you can a great advantage in the market.
I know that I personally didn’t start understanding balance sheets and income statements until I studied bankruptcies and what made them happen. Now I have the utmost confidence in my investments, because I know precisely how to avoid the worst case scenario.
With that said, here are the 6 terribly wrong investing moves by beginners.
1. Burying their head in the sand and letting investments run themselves
The majority of investors put their investing plan on autopilot. They trust that it will all take care of itself. They think that they don’t need to learn about investing.
This is all wrong. Why would you spend so much of your life working for a living without spending even minutes to plan it? Yet so many do.
They get overwhelmed by all the Wall Street jargon. They feel intimidated by the Ivy League MBA-ers, the high frequency traders, and the 3rd order derivatives.
I don’t blame you. It is intimidating. But that’s why I created this website.
This is the place for you.
It’s true that tackling investing is not an easy task. But you don’t have to learn everything. You just need a grip on the basics, and that’s my goal here at Investing for Beginners.
You can understand the basics, and you can take control. Instead of letting your money control you, take control of your money. That is the first step.
2. Relying on the T.V. for investment advice
I can’t blame most people for doing this. It works with so many other skills. Cooking, sports, music. You can learn so much about these hobbies just by turning on the tube.
But if they understood how the financial T.V. industry works, maybe they’d be less likely to trust it.
Unfortunately most people don’t. That industry is run by one thing, and one thing only. Money. And how do the T.V. networks make more money? By getting more views.
Simple as that. The T.V. channels don’t care whatsoever about your economic well being. Most websites are built like this to. They have one goal and one goal only.
To get you to click or get you to watch.
So what is a T.V. channel like MSNBC or CNBC going to do? They aren’t going to teach you what you need to learn about investing. That would be boring. Instead they talk about the most popular stocks and the most sensational stories.
Just like the news. What do they report on? Not on what is most important or helpful to you. Instead what is interesting, entertaining, intriguing.
The T.V. station will not care that millions could be following their stock tips. They don’t care that they frequently tote a stock while it’s going up, and then flip their position on the same stock when it turns back down.
They don’t care about you or your wellbeing. If their advertisers are happy, they are happy. What makes their advertisers happy? More sales and more views.
So next time you feel inclined to turn on the T.V. to “get some insight” on your investments, think again.
Warren Buffett has often said. The further you are from Wall Street the better. The wisdom in that is so, so true.
3. Relying on a coworker’s stock tip– or the mailman’s
They say that you can know when a stock crash is about to happen. When you are getting stock tips from people who don’t usually care about the stock market. When everyone is confident is when the market hits a top.
The reason why the market causes so much misery is because no one can predict when it will bring profits or when it will stop.
When a coworker or casual citizen like the mailman gives you a stock tip, politely smile and then immediately disregard it for yourself.
A stock tip from a random source is like a lottery ticket, but you have much more to lose.
The odds of it making you wealthy are slim. Relying on that as an investment strategy is foolish.
You really think that an everyday Joe will have a stock tip that is secret to the rest of the world? In this day of instant information and the internet? Let’s be real.
Actually you can make all the money in the world with investing with information that everybody knows, not information that nobody knows. Warren Buffett has shared that that’s how he’s made money in The Essays of Warren Buffett.
You won’t be successful by relying on stock tips. So just don’t do it.
4. Panicked selling at the bottom
This terribly wrong investing move goes hand in hand with wrong investing move #2. During the worst stock market crashes and bear markets, the internet space and newspaper space is filled with the most foreboding headlines.
The world is going to end! The sky is falling! We will never recover! This story has been played out time and time again. Every 5-10 years or so we hear the same thing.
So how do beginners react? They sell, they panic, they sell some more. They follow the crowd. This is what everyone else is doing.
This is a fantastic way to cripple your investing returns. You want to be buying low and selling high, not the opposite!
A lot of this fear comes from insecurity. The majority of investors don’t take the time to learn about investing. They are too lazy.
What does this result in? Panicked moves and selling at the bottom. When you know how investing works and are confident in what you are investing in, you won’t be swayed by the newest economic recession.
The economy goes through recession and prosperity like the seasons change from spring to fall. It’s inevitable. Smart investors know this. But the uneducated sheeple do not.
That’s why they sell at the bottom. Just do the opposite. Stand out from the crowd.
Wealth is built this way.
5. Feeling like they are missing out on the action
The fear of missing out is a strong one. Have you seen the commercials of fear of missing out on football? (#FOMOF). I know I suffer from this fear.
But this is one fear you don’t want to give in to when you are talking about investing. Some of the biggest bubbles that Wall Street has seen as come from fear of missing out.
From checking out what your neighbor has and wanting it. Guess what? The grass isn’t always greener on the other side.
People who seem like they are making a fortune on stocks never do.
How many stories have you heard that involves people saying, well I almost became a millionaire from the stock market BUT “this happened.” Yeah, well you’re not alone buddy.
With stocks, the higher they go the harder they fall. If you aren’t taking the time to learn about your investments, then it doesn’t matter if you get a couple of quick winners. Your long term results aren’t going to be pretty.
You can give a man a fish and feed him for a day. Or you can teach him how to invest, and he’ll be wealthy for the rest of his life.
Don’t try to take shortcuts with your investing. Don’t get scared that you are missing out on fantastic gains and epic fortunes.
Sure, that story at the cocktail party sounds nice. But that same story will be the sad story you hear on the news just a few months later.
Fortunes are made on Wall Street. But they aren’t made the way everyone thinks they are made. They are made slowly over decades.
It’s no secret. If you stop being lazy you can see through the fluff. Skip the dramatics, skip any jealousy or envy.
The road less taken is profitable for that same reason.
6. Trusting Social Security for retirement
I really hope that you strive to be an independent person. I’m sick of all the dependency in this country. People just sitting around, looking for handouts.
I know you aren’t that type of person.
If you are a successful person, I want to challenge you with this. Why are you working so hard right now? If you’re making good money right now, then you probably have a good lifestyle.
Do you think it would be hard to downgrade this lifestyle? I’d say yeah. But you’re probably thinking, this won’t happen to me. I make good money now. Why would it ever change.
This is what everyone thinks. And then everyone gets it wrong. You see part of the trap of living the good life is that you spend all your money now.
When you leave nothing for the future and nothing for investing, all of your good money disappears as soon as that job disappears.
What if you get a surprise layoff? A surprise recession? Surprise, you’re 65!?
That one day that could happen will probably be that one day that will happen. At least for the majority. With the advances of healthcare, many people are living to 70 and beyond.
And when you do retire, you will absolutely have a downgrade in lifestyle if you don’t have money invested. Think Social Security will solve all your problems?
Social Security is a joke. The payments out there right now are peanuts. And it will be even worse in the decades that follow.
You can go on their website, right now, and it will explicitly say that their funds are dwindling. It’s unsustainable at the rate it’s going right now.
What does that mean for the future?
Ummm, probably some cuts. So if you’re making any kind of good money right now, realize that Social Security will not sustain your current lifestyle.
If you want to keep that kind of lifestyle, get it going and start investing. This terribly wrong investing move goes hand in hand with wrong move #1.
The biggest part of your future and your life can not be ignored.
Blind trust will get you no where. You may be able to escape in other areas of your life, but this one will hit you like a ton of bricks.
If you like money and the lifestyle it brings you in any way, do not ignore this advice. Some things in life are hard realities.
Realizing you’re out of time and money, that’s probably the biggest.
**6 Terribly Wrong Investing Moves by Beginners**
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