3 Mistakes to avoid as a Beginner Investor
Jun 09, 2024Hello Stoic Investors,
Today I want to share with you 3 mistakes I made as a beginner investor that cost me $62,000.
By avoiding these three mistakes, you can improve your investment strategy and avoid losing money.
Investing is a long journey, and learning from others' mistakes can help you succeed!
Mistake Number 1: Not Using Tax-Advantaged Accounts
One big mistake was not using tax-advantaged accounts.
It doesn't matter how much money you make if you end up giving a lot of it to the government in taxes.
Learn about the tax rules in your country and find ways to pay less taxes.
Here are some tax-advantaged accounts to consider:
United States: Roth IRA
United Kingdom: Stocks and Shares ISA
France: PEA (Plan d'Épargne en Actions)
Australia: Superannuation
Canada: TFSA (Tax-Free Savings Account)
Germany: Riester-Rente or Rürup-Rente
Japan: NISA (Nippon Individual Savings Account)
These accounts can help you keep more of your investment gains.
Mistake Number 2: Not Balancing High-Risk Investments with Safer Ones
Early on, I put too much money into high-risk stocks, hoping for big returns.
But not all stocks recover after going down.
Sometimes, you can lose your money for good.
For example, I once invested heavily in a new tech company that seemed promising.
When the company didn't perform well, I lost most of that investment.
To avoid this, balance your investments.
Don't put all your money into high-risk options.
I now use a 60-40 split:
I put 60% of my money in safer investments and 40% in high-risk ones.
Safe investing is often better in the long run.
Mistake Number 3: Not Contributing Regularly to My Investments
I also failed to invest regularly.
Think of your investment contributions like paying rent—you wouldn’t skip a month.
Be consistent with your investing.
For example, I used to invest a large amount one month and then skip several months.
This inconsistency hurt my overall returns.
Let's say you invest $500 every month.
With regular contributions you can harness the power of Compound Interest.
Your investments can grow significantly over time.
If you invest $500 every month for 20 years with an average annual return of 7%, you would end up with
about $260,000.
That’s the power of consistent investing and compound interest!
So, Note down these three key-points and start investing today:
1.Use a Tax-Advantaged accounts: Learn about the tax rules in your country and find ways to pay
less tax.
2.Balance high-risk investments with safer ones: Allocate 60% of your money in safer investments
and 40% in high-risk ones.
3.Contribute regularly to your investments: In this way, your investments can grow significantly over time.
