 Beginner investing mistakes can cost you a lot of money all the way from losing a few dollars to losing your entire portfolio. And a lot of these are mistakes that I see apes, I mean beginners making over and over again. But the good news is these mistakes are totally avoidable if you know what to look for. So buckle up, YOLO that like button and let's get started with the top 10 investing mistakes that you want to avoid in 2022. All right, so the first mistake that I see people make, and this might be the worst mistake of all, is waiting too long to invest. So half of millennials that say they aren't investing say that they're waiting until they earn more money. Now these millennials obviously have not messed around with a compound interest calculator. And I think everyone has heard of this, but compound interest is basically the eighth wonder of the world. Right. So if you don't understand how compound interest works, here's a quick calculator. This one was literally put out by the SEC. And if you do $100 a month at an 8% interest rate, you'll have $688,050 years. Right. So that's just $100 a month might not be enough to retire, but that's a heck of a lot better than having nothing. So this means you should absolutely get started investing, even if you don't have that much to invest. Now, aside from the numbers, because I feel like a lot of channels have gone over this, telling you how important it is from a statistical standpoint. And those are important, but I think even more important is the human element. When you get started investing early, when you don't have all that much money, that's going to make it so much more comfortable for you to invest later on when you're making more. It's one of those things that builds good habits. So even if you're in a position where you don't have very much money, or you might even be in debt, I think it's worth it for you to just get your feet wet and start investing anyways. Even if you just start investing a little bit of money every week or every month, the sooner you start doing it, the sooner you're going to learn and build that habit. Because you can read up on it and you can watch videos on it and that's great. Definitely watch my videos for instance. But realistically speaking, at a certain point, you kind of just have to jump in and start doing it yourself. And that's where the real learning is going to take place. Now it's a lot easier to learn about investing if you are around a group of other people who are also learning. So consider checking out my Patreon group down in the description below. You will get access to a private discord. I do live streams on there. I have one-on-one consultations with people sometimes. So it's a really good place for you to learn about investing. Number two on the list, no due diligence. So this comes from the tools that you use, the research that you do, the educational channels that you watch. And this is commonly referred to in the investing community as due diligence. Now naturally, there's tons of channels here on YouTube that are going to tell you to invest in penny stocks or day trade. And these are two very, very risky forms of investing. In fact, you don't really even call it investing. It's more speculation or trading. Your chances of making money in the long run, day trading or penny stock trading are likely going to be less than 1%. And your chances of losing money are over 90%. And this has been statistically proven. You can watch all kinds of different videos about it on YouTube. You can look up articles on Google. And I've brought it up in other videos and I've gone over it extensively. So I'm not going to go over in this video. You'll just have to either take my word for it or do your own research on it. Now, not that there aren't a select few people who are consistently successful with day trading. I personally have not met anyone who's successful with just day trading. But I do think there are people out there that are really good at it. But that is incredibly rare. So you really want to be careful about your sources of information on YouTube. And by using good sources of information and doing your due diligence on different investments before you make them, you're going to avoid a lot of pain. And if you did your due diligence on the quote I just mentioned, you would know that that's actually the author of Don Coyote, which is the first novel ever. See what I did there. Number three on the list is going to be not doing your own research. Now, there's absolutely nothing wrong with listening to other people. But there's a few things that I recommend when you're doing that. First of all, when you are first looking into a stock or a cryptocurrency or something along those lines that you want to invest in, I recommend that you do your research on your own before you start listening to the opinions of others. And the reason for this is because if you don't do your research on your own at first, you're very likely going to get swayed by other people's opinions. And it makes sense because you don't know anything about the stock on your own. So when they say things about the stock, you are learning new things. And so you automatically put them in a position of authority when it comes to knowing their stuff on that stock. Second of all, even if you do listen to somebody after doing your own due diligence on it and they present you with really good evidence, make sure you always check their sources. And then the third thing is, I like to look up as much negative information on an investment as I can. This is basically playing devil's advocate and seeing what the negatives of that investment are. Because usually when an investment gets a lot of hype, you're going to hear a lot of people saying good things about it. And you're not going to hear very many people at all saying bad things. So if somebody is saying bad things about it, you definitely want to have an open mind and listen to their opinion as well. Now, when it comes to doing your own research, there's several different types of analysis. And the biggest ones are going to be fundamental analysis, technical analysis, and sentiment analysis. So this video wouldn't be long enough to even cover one of those because it's really complicated. There's a lot to it. But with that being said, my personal opinion is I really like fundamental analysis the most. I think that's the most important one. My second favorite is sentiment analysis. And my third favorite is technical analysis. Not that there's anything wrong with technical analysis or sentiment analysis. I just personally think fundamental analysis is much more important. But I'm also not one of those people who totally discounts the other two types of analysis. I do think they're important, but I just think fundamental is better. And I think the best of all is actually combining all three different types of analysis. Number four on the list is not having conviction on your investments. Once you've done your due diligence, you've done your own research, and you've decided to make an investment, it's important that you have confidence in that investment. And the easiest way to have confidence to have conviction is to have a goal, a strategy and a plan. And if you don't have these, you will almost certainly panic sell when the market crashes like it just did. Now, the phenomenon of people losing their conviction is so common that they actually made an acronym and that acronym is FUD. FUD stands for fear, uncertainty and despair. And this is where people get really fearful when the markets crash and they end up selling their positions because they think it's just going to keep going down. And a lot of the time right after you sell, the market ends up going right back up and you lose out on gains. So for me personally, I almost never sell because I am a long term investor. In fact, I don't really even pay attention to the market all that often. Whenever the market's going down, I know I'm getting my assets at a discount. So that's great. And whenever the market goes up, I know that my portfolio is going up. So that's great as well. So your goal might change depending on your personal life circumstances. So me personally, I want to retire early. So I want to retire before I'm 40. There's a good chance I'll actually retire before I'm 35. I'm well on the way to doing that. For a lot of other people, they don't want to retire till they're 65. So their goal and their plan are going to be completely different than mine. And therefore their strategy might be different as well. Your goal and your plan might also differ depending on your age. Generally speaking, younger people take more risks. And that's probably a good thing because they have many, many years until they have to retire. And older people want to have a very conservative investment portfolio because they don't want it to crash right before they're planning on retiring. And then your strategy is going to be like the vehicle that gets you from point A to point B. And you really want to take your time figuring out what your goal plan and strategy is because you want to be very confident in it. If you're confident in your goal plan and strategy like I am, for instance, market crashes like this do not scare you at all. I haven't had a single sleepless night in my investing career. I don't really worry about stocks or crypto all that much at all. Number five on the list is going to be taking on too much risk. Now we already talked about penny stocks and day trading and why these are going to be really bad choices for the average person 99% of the time. And the reason for this is because the risks here are just too high to justify the rewards. But there are many other types of investing that fall under this category as well. YOLOing all of your money into a single asset that has a bunch of hype around it is one huge mistake that I see people making over and over again. This almost never ends well. And it's pretty much the equivalent of going to the roulette table and then putting all of your money on one color. But the few times that it does do well, it makes it into the news. It gets covered by lots of YouTube channels, gets lots of upvotes on Reddit. And so it makes it seem like a much better strategy than it actually is. So some of them are going to be low risk, but also low reward. And an example of this would be bonds. Some of them are low risk, but medium reward. And an example of this would be index funds. And then some of them are going to be medium to high risk, but also high reward. And I think a great example of this would be cryptocurrency. And it's important to understand the risk that you're taking and also your own risk tolerance. And generally speaking, it's expected that young people take on more risk than older people, and that brings me to my next point. The number six mistake I see is people not taking on enough risk. Being too conservative with your investments can also end up being a huge mistake. For years and years, mainstream finance made fun of cryptocurrency and Bitcoin, even though it was far outpacing stocks. And funny enough, during that time, many of these big finance firms were secretly buying cryptocurrency while they were crapping on it in the public. And now many of these same finance experts recommend that you keep 5 to 10% of your portfolio in cryptocurrency. Some experts are even recommending higher than that, like 30%. So oftentimes when you're young, you should take chances, you should take on risk in order to maximize your chances of success. And this isn't just with investing. This also applies to your career, starting a business, et cetera. Number seven on the list is going to be not diversifying your investments. Now, when it comes to stocks, just talking about stocks alone, the easiest way to diversify your investments is to invest in index funds or ETFs. I'm a huge fan of index funds and ETFs. They're very boring. Once you understand them, it takes like, I don't know, 10, 15 minutes to understand them. And once you understand them, there's really not that much more to learn about them. I did a video on some of my favorite index funds you can check that out right here, but index funds basically automatically diversify your investments for you. And they also beat over 85% of hedge fund managers and professional investors. Now, on top of diversifying your money when it comes to companies, which super easy way of doing that is index funds. Like I said, I think you should diversify your money outside of stocks as well. Two really good ways of doing that is cryptocurrency and real estate. But there are many other ways you can invest, you can invest in gold bonds, et cetera. And another thing you can do to reduce the risk is you can dollar cost average into those investments. So if you have $10,000 to invest right now, you're really excited, you want to get started investing instead of putting all of your money into the market at once trying to time the market, better idea usually is to put $1,000 a month for the next 10 months. And an easy way to do that is you can just set up automatic payments. And a lot of the big brokerages will allow you to do this very easily. Number eight biggest problem I see is emotional investing. And you see this all the time. And the biggest reason in my opinion that people emotionally invest is because the time that you hear about an asset, whether it be a stock or a cryptocurrency is the time usually when it's overvalued. So for instance, Dogecoin is a perfect example. It was in the news. It was huge. Everybody was talking about it. People were making YouTube videos about it. People were searching it on Google news outlets were covering it, even like the biggest national news outlets were covering it. It was actually kind of hilarious. And of course, that was the time where it was at its peak. And that was the time you were most likely to hear about. And it's kind of hard to invest in something if you haven't even heard about it. So people hear about it. They see how it's gone up like 1 million percent in the last year or whatever it was. And they put their money into it. And then it immediately crashes. So basically you see this a lot, you know, you've got excitement buying. That's a really good example. We're seeing this right now with the market crashing where people are panic selling and panic selling is another example of emotional investing. Number nine on the list is not having an emergency fund. And really it's also just not investing any more than you can afford to lose. So you never want to invest more money than you can afford to lose in the short run, right? So having an emergency fund is a great way to accomplish that. And an emergency fund is basically where you have your expenses covered for three to six months. Now my emergency fund is personally 12 months. I like to take it a step further. But three to six months is a really realistic, solid goal for you to aim for. Now this is especially important if you have dependence and you have a high overhead, right? So if you have a mortgage on your house, you're taking care of other people, you have more expenses. This is especially important. But if you're a young person who lives in their parents basement and you pretty much have no expenses, obviously this isn't going to be as important for you. The number 10 issue I see is people not understanding taxes. Now it's important that you talk to your accountant about this because there's different rules in different states. There's different rules for different types of businesses. There's all kinds of different things that can change depending on the situation you're in. So you really have to take it on a case by case basis. Kind of like asking a doctor for recommendation, right? Doctors are going to tell you different things depending on your situation. Now one great thing you can do to reduce your taxes is to invest in a tax advantaged account like a 401k Roth IRA or HSA. Now I've talked about that extensively on this channel, but you know, you absolutely should be investing in your 401k if your company offers you matching. So a lot of the time your company will offer you matching up to 5%. You should definitely be taking advantage of that because that is basically free money. Same thing goes for your IRA. So you can contribute about $6,000 a year into your Roth IRA and you should absolutely be doing that because it is essentially tax free money. HSA is a little more rare, but if you're able to do it, you should definitely take advantage of that as well. Now another thing about taxes is you've got short-term and long-term capital gains tax. If you are trying to constantly go in and out of trades here in the US at least, you are going to have to pay what's known as short-term capital gains tax. Now there's a nice chart here that the website financialsamurai.com made really cool website. I like them a lot, but you can see that the difference between short-term and capital gains tax, which is the difference between buying or selling within one year or buying or selling after one year, after one year would be long-term and before one year would be short-term. You can see that the difference here is somewhere between 10 and 17%. So in many of these cases you're going to be paying almost double what you would in short-term capital gains taxes than if you just decided to hold it. And this is one of the many reasons why it's best to be a long-term investor rather than a short-term trader. And there are a lot of short-term traders out there that are feeling the pain right now with this market downturn, whereas us long-term investors are sitting back and relaxing. So if you enjoyed this video, check out my index fund video that I just made. Hit that like button, hit the subscribe button, ring the notification bell, and I will see you next time.