For first-time investors, the act of choosing where to put your money can be daunting.
But the trouble doesn’t end once you’ve handed over your cash. After you put some “skin in the game” it’s easy to find yourself obsessively visiting financial web sites and poring over your rate of return. Throw in a seemingly infinite supply of articles and blogs about why your investment is good—or bad—and you have a perfect storm of confusion.
Should you pull out of the ETF that’s been down for the past three months and invest in a hot mutual fund? Or should you take a chance on an oil index fund?
Welcome to the biggest single mistake that people make in trying to build their wealth: being too active.
For the average investor, flipping in and out of investments and chasing yesterday’s hot mutual funds or stocks is a fool’s errand. Not only are yesterday’s winners often tomorrow’s losers, but the transaction costs of moving your money around can eat up profits.
So ignore the hype and avoid frequent trading. Never buy an investment—whether it’s a house, stock or a fund—if you’re not prepared to hold it for the next 10 years.