When it comes to investing, we all make mistakes. Luckily, they are usually minor and easy to overcome. But four mistakes are so huge that just knowing about them can add hundreds of thousands of dollars to your personal net worth over your lifetime. The best part? You don’t have to be an expert to avoid them.
Investing Mistake #1: Being a Nonstarter
A startling number of would-be investors simply stand on the sidelines and miss out on the greatest builder of wealth available to the average citizen. Many Americans just never save or invest anything at all. If you haven’t yet, you should start investing now.
Investing Mistake #2: Waiting Until…
The second mistake is intending to start but waiting too long. Too many of us put off investing with a perpetual series of untils. Until we get out of school, until we land that next job, until we buy that Jet Ski. You get the idea.
If you remember just one thing about investing, it should be the incredible power of getting started early. A mediocre investor can, with just a few years’ head start, easily out-earn a top-dog professional. Every day counts. When it comes to investing, the best time to start was yesterday. The next best time is today.
Investing Mistake #3: Fearing Failure
A third mistake too many investors make is playing scared. Every investor we’ve ever met has suffered down years, and even the greatest investor in the world picks stocks that don’t pan out. Investing for the long term is a lot like shooting free throws in basketball. Michael Jordan, arguably the greatest player ever,shot just a bit over 80% from the line during his career.
Chances are you’re not the Michael Jordan of the investing world, at least not yet. It’s essential to set realistic expectations and know ahead of time that you’re going to brick a few shots, especially in your rookie year! Don’t let the fear of a setback throw you off your game.
Investing Mistake #4: Expecting to Get Rich Quick
Finally, practice patience. If you don’t have the temperament to let the principle of compounding work its magic, you probably won’t get very far as an investor. Master investor Warren Buffett was once asked why so few people have been able to emulate his success, despite the countless words that have been spent dissecting his investing philosophy.
“The reason,” Buffett says, “gets down to temperament. People want to make money fast, but it doesn’t happen that way.” Put simply, there is no way to get rich quick in the stock market. When the greatest investor in American history says, “It doesn’t happen that way,” it’s smart to listen.
Are you in the game? If you aren’t, start today by opening an account at a discount broker. If you’re already a seasoned investor, make sure you keep at it, investing regularly. The key is to get in the game and stay in the game. Let time work its magic. You won’t need to be Michael Jordan or Warren Buffett to enjoy a wealthy future.
This article was published in April 2011 and has been updated. Photo by @criene/Twenty20