5 Investing Mistakes That Are Costing You Millions

When it comes to investing there is no one-size-fits-all program that will guarantee year-over-year returns. What you can bank on are the countless mistakes new and even seasoned investors make year after year that cost them big time. So, whether you are trying to avoid wasting money or putting money in the wrong places, don’t make the:

5 Investing Mistakes That Are Costing You Millions:

1. Not Holding For Long Term

2. Trying to Break Even or Catch Falling Knives

3. Thinking Your Home is an Investment

4. Not Having a Diversified Portfolio

5. Timing the Market

Trust us, you do not want to be making these common investing mistakes. Luckily they are easy to avoid and with the right guidance, you won’t have to worry! Read below to find out why people make these mistakes and what you should look out for.

1. Not Holding For Long Term

Whether you’re looking at stocks, bonds, or a real estate investment the fact is if you aren’t willing to hold something for a lifetime, don’t buy it in the first place. Most investors tend to sell assets too often and end up losing on either lost opportunity, short-term taxes, or even sales commissions.

The truth is, you can’t always expect markets to go up but you can expect them as a whole to go up within long-term time frames, especially when it relates to major institutions in the United States. Let’s take stocks as an example. If you look at the stock market from the 1920s to around 5 years ago the S&P 500 has consistently yielded a 9.5% year-over-year return.

Let’s do some simple math. A 9.5% yearly return means that you will be doubling your initial investment every 7.64 years. Call it 8 years for good measure and that’s just principle without dividend reinvest or additional capital. So, a $100,000 investment would follow this course over a lifetime:

• Year 1: $109,500

• Year 2: $119,902.50

• Year 3: 131293.23

• Year 4: 143766.08

• Year 5: 157423.85

• Year 6: 172379.11

• Year 7: 188755.12

• Year 8: 206686.85

In just 8 short years you more than double your investment if you stay patient. What if your account for a longer time frame? Here’s what a retirement account would look like with only a $100,000 investment:

• Year 20: $614,161.21

• Year 30: $1,522,031.27

• Year 50: $9,347,725.68

There’s a reason Warren Buffet has never sold a share of Coca-Cola stock and likely never will! Sure you could sell after a few years in the green but wouldn’t you regret looking back at your portfolio and realizing you lost out on hundreds of thousands of dollars? So take it from us, don’t let market fluctuations, dips, or even recessions scare you, and definitely don’t sell your holdings at the first sight of a profit. If something is worth buying it’s worth holding for a long time.

2. Trying to Break Even or Catch Falling Knives

If you’ve ever played BlackJack you have likely been in a losing streak at some point and believed that if you could only catch a break you would break even and leave. The truth, you’re likely going to lose everything you bet and even if you do break even, few have the discipline to walk away.

The same goes for investing. Although in the previous point we argued that selling prematurely even in the red is a bad idea, that doesn’t pertain to asset classes and individual investments that show no sign of recovery. There’s that old saying; “If I only invest $100, how much could I really lose?” The answer is you stand to lose the full $100.

It’s true, investments can and do go to zero and while you may be able to do a tax write off, we guarantee it won’t heal the wound of that huge chunk of capital you lose so be smart and don’t hold on to obvious losers with the hopes of breaking even.

Similarly, you don’t always want to buy when markets go down because some industries just never bounce back. In other words, you don’t want to buy falling knives.

3. Thinking Your Home is an Investment

This is probably one of the most common mistakes people make and among the most controversial. If you ask the average American, they would tell you that buying a home is realizing the American dream because if you work hard and pay off your 30-year mortgage you’ll have millions in capital in your home.

While it is true that real estate prices in good locations will likely go up over 5% year after year and yes you accumulate capital in your home it’s not really an investment and here’s why. Capital sitting in your home is just that, immobile. If you’re living in the house, you bought pretending like it’s an investment then you aren’t generating any cash flow and your money isn’t working for you.

Essentially what a home ends up being is a fantastic way to save money because it beats the interest rate that banks will give you but even when you retire then you actually have to sell your home and move somewhere else in order to reap your savings. Even then, you have to consider taxes, utilities, and renovations.

4. Not Having a Diversified Portfolio

Here’s an easy one, don’t have all your eggs in one basket! This is investing 101 but even seasoned investors get this wrong. All too often people will dump money heavily into one industry or sector of the economy. Even great investors like Grant Cardone and Charlie Munger invest too much capital in one market.

We don’t advocate for a completely low-risk portfolio because even then you aren’t letting any room for major growth; however, you shouldn’t be all in on stocks, bonds, ventures, or real estate. Diversify your portfolio across sectors and within markets.

We recommend having a healthy balance of capital within the market both in the United States and internationally.

5. Timing the Market

Here’s the thing if Warren Buffet can’t time the market, the truth is, neither can you. Even Mark Cuban said in 2020 that he believes we haven’t reached the bottom and he is holding on to a lot of cash when the reality is that markets have bounced back and grown some after the crash in March of 2020.

Sure, recessions can be scary but that’s why you have to invest in assets you trust and are willing to hold on to for the long term. If you had invested $100,000 in an S&P 500 index fund during the 2008 housing bubble you would have lost about half your investment at the lowest but hypothetically if you were to hold on, your investment would be worth over $160,000 just 7 years later.

Leave timing the market to the professionals, instead if you are ready and able to invest do so promptly and without regret.

Whether you’re a novice investor or a veteran, mistakes can be made and they can be costly. Of course, learning from mistakes is how we grow as investors and ensures we take advantage of opportunities in the future because history repeats itself and markets are no exception. For professional guidance and advice contact us today and take your portfolio to the next level.