Are You Making These Financial Investing Mistakes?

Hi Reader,

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When we think about investing mistakes, most people imagine choosing the wrong stocks or assets. In reality, the biggest mistakes happen before you buy anything. They show up in how you prepare, how you think about risk, and how you use (or misuse) your money behind the scenes.

Let’s break down some of the most common beginner mistakes, and how to avoid them.

#1: Waiting for the perfect time to invest

This might be the most expensive mistake of all. Many people sit on the sidelines waiting for the “right moment”. When markets are calmer. When elections are over and things feel stable. When prices fall.

The perfect time rarely announce itself and waiting for the conditions to be perfect usually leads to not starting at all, or starting much later than you should have. Time in the market beats timing the market, almost every single time.

Morgan Housel’s The Psychology of Money uses the stories of Warren Buffett and Jim Simons to show why consistency and time matter more than brilliance or timing. As of 2020 when the book was written, Warren’s wealth was compounding at roughly 22% annually, while Jim’s reported 66% annual compounded returns since 1988. Yet, Jim’s net worth was $21.5 billion, and Warren’s was $84.5 billion. Below is a chart showing Warren Buffett’s wealth by age:

99.9% of Warren’s wealth was accumulated after age 50, when compounding truly started paying off. As Morgan puts it, ‘Warren’s skill is investing but his secret is time’. Buffett started investing seriously as a teenager and kept going for eight decades.

Start with what you have and invest consistently. Automate monthly contributions and let compounding do the heavy lifting. You don’t need perfect timing, you need enough time.

#2: Investing without an Emergency Fund

One of the biggest structural mistakes is jumping straight into investing without a financial safety net. Without an emergency fund, you may be forced to sell investments at the worst possible time to cover unexpected expense or you avoid investing altogether, because all your money feels ‘untouchable’.

The value of investments fluctuate and some assets have lock-in period which implies that you may not be able to access funds on demand.

Build a separate emergency fund that covers at least 3-6 months of living expenses (more if your income is unstable or you have dependents). Keep it in a high-yield savings account so it’s accessible and still earns something.

#3: Investing while drowning in high-interest debt

This mistake feels productive but quietly sabotages your wealth.

If you pay 18% interest on loan or credit card, and your investments return 10%, you’re losing 8% every year. Debt returns are guaranteed. Investment returns are not. So you could lose money in the market while still paying interest on debt. That’s a double hit.

Instead, prioritize paying off debt, especially high-interest debt before investing.

The real goal isn’t just to invest. It’s to invest from a position of strength. As always, with investing, you should start early, stay consistent, and not interrupt compounding.

Reflect on This:

• Which of these mistakes are you currently making, and what’s one practical step you can take this month to fix it?

Till next week, I am rooting for you, money-ly!

Dee

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Disclaimer: This does not constitute financial advice. Please conduct your research or consult your financial advisor for important financial advice.