Nine Top Investment Sins to Avoid

Before you tread on investing waters, it is helpful to know the most common pitfalls which every aspiring investor must avoid at all costs.

1. Doing nothing. Waiting for the grass to grow will not help you achieve a comfortable retirement.
2. Starting late. Procrastinating on an investment is the second biggest mistake to make. The earlier you start investing, the better off you will be.
3. Investing with unresolved credit card debt. Before even dreaming of a career in investing, pay off your credit card debt first. If you have $5,000 to investment and roughly the same amount owed to credit card companies, investing will surely be counterproductive.
4. Short-term investing. Invest money on shorter-term and safer havens for short-term goals. Invest the rest of what you have that you do not need for at least three years on the stock market.
5. Refusing free money. Never turn down a dollar offered provided it has no strings attached. Take advantage of what your company offers such as a 401(k) or similar tax-advantaged retirement savings plan with an employer match.
6. Playing it safe. This is a sin if you are young and you are missing out on investing in stock. Youth has its privileges. Be more of a risk-taker and reap long-term profits in stock. You have time on your hands to survive whatever the dips in the stock market and can choose to transition into bonds later.
7. Playing it scary. Being a daredevil is not always profitable. Do not risk all your money into a doomed investment.
8. Believing collectibles are investments. Collectible memorabilia or paraphernalia will not provide for you in the years to come.
9. Trading in and out of the market. Stick to a long-term investment for bigger profits. Trading in and out will burden you with fees later on and slice away your returns.

Three Essential Investing Tips

True, most people understand the concept of investing: exchange your money today for a company you hope will earn you more money over the coming years. While this may seem simple, what we have seen in reality suggests that doing it “right” and succeeding in it is far from easy. Those who have proven their mettle have done it differently from in their own ways --- take Warren Buffett, James Simons, and George Soros, who have made it big with varying approaches to investing. As the market evolves and becomes more complex, every investor, whether freshman or veteran, needs three essential tips to secure a return on their investments.

1. Know what kind of an investor you are and make sure your investments are consistent with that. Is your personality fit for a “speculator,” looking to maximize on short-term movements? On the other hand, are you the “investor”; more interested in buying stocks off a great business to hold on the long-term? Your chances of succeeding depend on how and where you put your money on the market.
2. Think independently and avoid becoming a market lemming. The thing that draws the crowds is not always the wisest thing to follow. This particular bandwagon syndrome that focuses on short-term results makes investors “act like a herd of crazy lemmings.” It pays to be independent in making decisions. Take Warren Buffett’s example. During the tech boom, almost everybody placed bets on short-term tech companies while Buffett stuck to his long-term investment methods on “boring” companies like Gillette. Rookie investors criticized Buffett for his “relic” style. Eventually, the tech bubble burst and Buffett proved them all wrong.
3. Do not rely too much on stock tips. Sure, stock tips can help point you in the right direction, but it is wiser to research on a stock first and buy it for a good reason.

Investment takes practice. Eventually, you will get better at it, especially when you unfailingly consider these 3 essential tips in your decision-making.

Top Ten Investment Strategies from Warren Buffett

Readers get a glimpse of how Berkshire Hathaway’s Warren Buffett generates wealth in John Train’s book “Midas Touch.” The following are the top ten investment principles used by Buffett himself.

1. Buy a share as though you were buying the whole company. Determine how an enterprise is worth but do not rely on formal financial projections or mathematical formulae. Invest in “a business you understand, favorable long-term economics, able and trustworthy management, and a sensible price tag.”

2. Volatility does not create risk. A serious investor sees opportunity in volatility.

3. Value should include “growth at a reasonable price” or GARP. The ideal companies have a business “moat” that has steady and reasonably predictable growth. In the long run, these businesses are more tax-efficient and more convenient than one bought at a bargain.

4. Invest on what you know best. Refrain from seeking the “newest” thing because it is too risky. Buffett's biggest investments are firms founded in the 1800s, such as American Express, Wells Fargo, Procter & Gamble, and Coca-Cola. Said Buffett: “Startups are not our game.”

5. Avoid investing in bad industries, or turnarounds. It is not sound to invest in a business that requires a revival.

6. Seek out businesses that can reinvest at high rates of return over long periods. Avoid investing in low-margin businesses that require cash from you periodically and can expect only modest rates of return.

7. Do not sell a great stock just because it has doubled. Its value could go up when you least expect it, sometimes going up 20 or even 100 times during the next generation.

8. Never offer your own underpriced stock for the fully valued stock of an acquisition candidate. You will end up on the losing end of the bargain.

9. Avoid long-term bonds. Given how easy it is to inflate currencies, this is not a wise move.

10. Invest like a fanatic. Concentrate relentlessly on how you can transfer wealth to your own pocket.