The Investing Mistakes I Made as a Beginner

The biggest investment mistake of my life came early. In 2006, I was 21 years old sitting on a few thousand dollars of life savings. The stock market was going up and I wanted in. At the time, I was an overconfident finance major, who read a few books on how to beat the market. Even worse, I began watching Jim Cramer and other shows on CNN.

Investing Mistakes
Photo by thinkpanama via Flickr

To get started, I asked my dad. My dad, who himself has never invested any significant money in the stock market, sent me to an investment advisor friend of his. I called the advisor and we arranged a meeting when I was to return home from school. Until the meeting with the adviser, I developed a strategy based on a few books I read and what I had been hearing on T.V. My plan was to invest half of my savings in individual stocks and the other half in mutual fund.

I sat down with the adviser, he explained to me his services, the research tools I was granted access to by becoming a customer, and the costs of investing through him. I was convinced that there was no way I could loose. With my strategy and his expert advice, I was going to be rich. I wrote a check later the day, dropped it off at his office, and by the next day I had my online account set up.

Looking back there were numerous mistakes I had made, here are the biggest…

My Investing Mistakes

Mistake # 1 — Not Knowing the Impact of Fees

For a flat fee of $500 a year, I could trade all I wanted. For whatever reason, I thought I was going to make more than 50 trades a year, so this was a good deal.

On top of the flat free for trading, there was a monthly account management fee. It was just a small percentage of my assets, so I thought it was no big deal.

On top of everything, the mutual fund also has management fees.

Since I didn’t compare this to anywhere else, I thought this was normal.

Mistake # 2 — Not Having Goals

I was cocky college finance major. I thought I could evaluate a business in an hour on Yahoo! Finance. The stock market was going up and I wanted in. My goal was to make a lot of money. That’s it.

Mistake # 3 – Not Understanding the Importance of Roth IRAs

I was investing in taxable accounts, with a strategy that required high turnover. I could have at least been investing in a Roth IRA, but I didn’t know what that was.

Mistake # 4 – Having a Complex Portfolio

The individual stocks were in different sectors, I thought that is what it meant to be diversified. Plus, the mutual fund, which was the best returning fund the previous year, had a combination of 30-40 different stocks in it. It wasn’t until I discovered index funds that I found out what diversification really was.


It’s a little ironic that this whole situation, led me to pursuing the path of a financial planner. I passed Certified Financial Planner® exam in November of 2009. I plan to own my own fee-only practice soon.

As for my investments, I now have a purpose for every dollar of my savings. My costs are minimal. My investments are tax-efficient. Since I’m in index funds or target date retirement funds, my total time spent monitoring my investments is about 15 minutes a month.

I started out as a gambler and became an investor. It turns out, I make a lot more money and get a lot more sleep, being an investor.

About the Author

By , on Nov 1, 2010
RJ Weiss writes about personal financial planning for young adults at Gen Y Wealth. Subscribe today to his RSS Feed.

Best Low Cost Stock Brokers

Featured Articles

Leave Your Comment (8 Comments)

  1. Mike Woods says:

    My biggest mistake was thinking I could beat the market with penny stocks. It’s really just a legalized form of gambling.

  2. juana says:

    i wanted to invest 1000 in gold Im new at this and need tips i am a hairstylist, and a client says hes been investing in gold for years i think im like most people looking for a quick return

    • Pinyo says:

      @Juana — Looking for a quick return is the wrong way to look at investing, also, investing in gold is really not recommended for a new investor. If you need money in the short-term, I’d recommend looking at cash equivalent like a savings account or a certificate of deposit. If you can part with your money for several years and just let it grow, I’d recommend looking at target retirement funds from Vanguard.

  3. Clayton says:

    I think my biggest mistake starting out, was not spending enough time learning too. I have wasted so much money being ignorant. So I decided to compete with my finance guy and I have beat him every year and I only invest in mutual funds or something safer.

  4. Richard says:

    Trying to time the markets is a losers game for amateurs and so going with index funds is a much smarter plan. I also think just going where you see the market going is most of the time putting you behind the curve and you often wind up buying high and selling low. Pros who successfully invest in individual stocks pick winners before they become winners. Thanks for the insight.

  5. Robert says:

    I would add in there listening to everyone else, but not really forming your own opinion. Everyone is an expert when it comes to stocks/bonds/mutual funds. It is important to understand what you are investing in, the full risk, and WHY!

  6. RJ Weiss says:

    Thanks Nick.

    I figured a few people were down a similar path as I was. If I could just save one person the money, I thought this post was worth it.

  7. nick says:

    good story! I almost got roped into the same trap when I was younger. Luckily my father-in-law had been down that road and knew better. I wish you luck as a fee based planner, hard to be the one who is expected to have a crystal ball….

Leave a Reply

Your email address will not be published. Required fields are marked *



The information on this site is strictly the author's opinion. It does NOT constitute financial, legal, or other advice of any kind. You should consult with a certified adviser for advice to your specific circumstances.

While we try to ensure that the information on this site is accurate at the time of publication, information about third party products and services do change without notice. Please visit the official site for up-to-date information.

For additional information, please review our legal disclaimers and privacy policy.


Moolanomy has affiliate relationships with some companies ("advertisers") and may be compensated if consumers choose to buy or subscribe to a product or service via our links. Our content is not provided or commissioned by our advertisers. Opinions expressed here are author's alone, not those of our advertisers, and have not been reviewed, approved or otherwise endorsed by our advertisers.