Becoming a millionaire isn’t about being perfect.
F*ck that. Nobody is perfect. We all make mistakes. The key isn’t perfection. The key is avoiding as many stupid mistakes as possible along the way.
👉 Average investors make mistakes.
👉 Above-average investors make fewer mistakes.
👉 Perfect investors are liars.
In this email, let’s talk about the five biggest mistakes that average investors make and how you can graduate from average to above average.
The 5 Biggest Mistakes Average Investors Make
Here are the five biggest mistakes investors make:
- Failing to Diversify Your Portfolio: One of the biggest mistakes you can make is putting all your money into one stock or asset class. Diversification is key to managing risk and ensuring that you have a well-rounded portfolio.
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Diversification is as simple as investing in different types of assets, such as stocks, bonds, real estate and commodities – both inside and outside the United States. Index funds and ETFs make diversification dirt simple.
​ - Chasing Hot Stocks: Investing based on short-term trends and hype is a dangerous game. Instead, focus on long-term fundamentals and invest in companies that have a proven track record of success.
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Better yet, invest in ETFs and index funds and call it a day. You’ll outperform 95% of active investors and have way more time to enjoy life.
​ - Ignoring Fees and Expenses: Every investment comes with fees and expenses, but some are much higher than others. Be sure to read the fine print and understand what you’re paying for before making an investment.
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Actively-managed funds generally charge the biggest fees. These include mutual funds, hedge funds and private equity funds. Even a fee of just 1% can erode your investment returns over time.
​ - Timing the Market: It’s impossible to consistently time the market, period (especially if you’re that Jim Cramer guy, who gets paid big money to steer people wrong…). Don’t try to time anything. Don’t day trade.
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Instead, focus on a long-term investment strategy and stick with it.
​ - Not Maxing Out Your 401(k) Match: Many companies who offer 401(k) plans to their employees match a certain percentage of your income by contributing their money into your 401(k) plan. If your company offers this perk, jump on it like John Candy on a donut. This is 100% free cash and you’d be crazy not to take full advantage of it.
If you’re making one of these mistakes, it’s okay. Don’t beat yourself up. Just stop making them starting Monday when businesses are back open!
Chat soon,
– Steve
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