Let’s face it, being a beginner millennial investor in the stock market can be confusing. From the crazy terminology to the plethora of opinions – getting started investing as a beginner can have a steep learning curve.
While this article won’t pave a golden path to wealth, it will hopefully open your eyes to the mistakes beginner millennial investors make. If you can avoid these five mistakes, I guarantee you will be better off long-term.
It took me years to figure out these five important lessons…I hope I can help speed up your learning curve!
Here are five common mistakes made by beginner millennial investors in the stock market.
Millennial Mistake 1 – Not approaching investing from a business mindset
I don’t know why, but so many proposed investment “gurus” don’t think of stocks from a business standpoint. They just view stocks as a bunch of numbers. They think they can take those numbers and use some math equation to solve the key to the stock market.
That is just not how it works.
The key to investing isn’t some mathematical equation – it starts by understanding that stocks are ownership shares of businesses.
If you’re a beginner millennial investor and develop the mindset you are becoming an OWNER of a company, you will avoid the pitfalls of so many who have learned the hard way.
It is simple – if you own the stock of a company, you are an actual owner of that company. That company sells products and or services for a price. Those products and/or services bring money into that company. Your job is to find companies which will continue to sell those products and services and bring profits to the company.
That’s basically investing 101 – find great companies.
Don’t mind crazy math problems or trading algorithms…just develop the mindset that stocks are ownership shares of business, and try to buy great companies that will continue to be great into the future.
Millennial Mistake 2 – Trading instead of investing (not thinking long-term)
To piggyback on mistake 1 from above, it is an unfortunate truth that so many investors think investing is trading.
One of the most important lessons beginner millennial investors should learn is that investing is NOT trading.
The people on the floor of the New York Stock Exchange…those people are traders.
When Warren Buffett needs to buy billions of dollars worth of a company’s stock, the traders to help him buy those shares.
Warren Buffett isn’t referred to as a “trader”, he is referred to as an “investor”.
If you begin investing with the mindset of being a “trader” instead of an “investor”…good luck.
Ask yourself this question, Where are are all the billionaire traders? There aren’t any. The billionaires are all investors. The ones who develop the mindset of purchasing companies, not bouncing in and out of stocks all day.
This brings us to our next part – think long-term.
If you think short-term, buying and selling stocks daily, weekly, or even monthly, you are a trader.
It is a terrible idea to buy a stock only to hold it a month. You should buy a stock because you want to own it for a long time. Warren Buffett purchased shares of Coke in the early 1990’s, he still owns them.
You should do what he does and find great companies and hold onto them.
Imagine if you bought Apple in March of 1993 and sold it in April to make a quick few bucks. You think you would have made more money than if you had just held it for twenty years?
You would be so mad at yourself today if you did that…so don’t do that.
Millennial Mistake 3 – Waiting
If you are waiting around to invest, that is almost just as bad as day-trading. Every year you wait is a year you are missing out on potential compound returns. If you start investing at age 33 instead of age 30, that three-year difference can cost you tens of thousands of dollars in compound interest.
Compound interest is an amazing phenomenon that helps your money grow and compound over time. The earlier you begin compounding your money, the more money you will have down the road.
If you are having trouble understanding how to get started and you are confused about what to invest in, just throw your money in a passive index fund. Or, better yet, take my FREE email course here:
Whatever you do, don’t wait. The longer you wait, the less you will have to compound, and you will be kicking yourself for the rest of your life.
Millennial Mistake 4 – Putting all your eggs in one basket
You have probably read about diversifying your investments. You know, the old “Don’t put all your eggs in one basket” saying.
If you only invest in one stock, you are taking on more risk than you need to. If you invest in ten to twenty stocks (as long as they are all in different industries) you will be able to create a diversified portfolio with less risk.
Or, you can buy an just buy an index fund. An index fund or an ETF that tracks the S&P 500 can be great for the beginner investor. By purchasing an ETF or index fund tracking the S&P 500, you will earn the average of 500 of the largest companies in the U.S.
There is nothing wrong with a beginner millennial investor owning an index fund that averages the gains of 500 companies in the U.S. So if you don’t want to try and find 10-20 stocks, you can just buy the index fund!
By the way, you can see my investment portfolio here: My Stock Portfolio
Millenial Mistake 5 – Trying to time the market
This isn’t just a common mistake made by beginner investors, it is also a mistake made by many experienced investors.
Timing the market means you are trying to buy at the lowest price, then sell at the highest price.
If you could do this, you would make the best gain.
The problem is… NOBODY knows how to time the market. Seriously. Nobody knows. You have probably heard someone get on TV over the past few years tell you the market is about to crash.
Those people have all been WRONG.
Even though they were wrong, nobody remembers. They just get back on tv and tell you their next prediction.
And, that next prediction will probably be wrong.
Then, one day, they say a prediction that ends up being right, and they just say, “I told you so!”
They inevitably have to get it right if they keep making precisions.
Don’t listen to those people. Invest your money stocks over time. If you dollar cost average and are continuing to buy stocks and/or index funds over long periods of time, you will average both high prices and low prices.
This is much better to do than trying to get lucky by timing the market or a stock.
This goes back to our point from above – don’t wait. If you had the mindset 5 years ago that the stock market was too high, you would have lost out on over a 100% gain over that 5 years! Not such a great move if you ask me.
In closing, if you are a beginner millennial investor starting off in the stock market, you can avoid these five common mistakes. If you are able to avoid these mistakes, you can do better than 90% of investors.
If you make sure you develop the correct mindset that stocks are pieces of businesses and not random math equations you trade in and out of, you will be so much better off.
If you don’t wait, don’t time the market, and don’t put all your eggs in one basket, you will avoid the potential to lose a lot of money due to risk. You will also avoid the loss of money due to not investing sooner in your life.
Avoid these common beginner millennial investor mistakes of I know you will make it further down the path of investing than most of your peers.
Thanks for reading!
You may also be interested in M1 Finance which lets you buy and sell stock for FREE! I wrote this article: M1 Finance Is Now Free?! No More Fees for the Best Robo-Advisor App
Disclaimer: These are the ideas and opinions of the author. The author is not responsible for the actions of those who read the posts on this blog. Each individual reader has a unique situation and unique needs. This blog is not intended to solve those unique situations of the readers. This blog is not liable for decisions made by the readers of this blog.