3 Things I Wish I'd Known Before I Started Investing

Investing

By: Greg Maxwell

Do you want to save yourself some aggravation — and potentially a lot of money — by not repeating the mistakes of other investors?

I've learned a lot — and made my share of mistakes — over my years of investing, including my time with The Motley Fool. 

To help you boost your chances of scoring the huge winners that can make such a difference, I want to tell you about the three biggest things I've discovered…

Things I wish I'd known before I started investing.

As you'll soon see, I believe these three simple, yet powerful, "investing secrets" have the potential to increase a career nest egg by … hundreds of thousands of dollars.

I know it's hard to believe! However, please allow me to show you why I think this is no exaggeration…

As well as a way you could take these investing tips and immediately stack the odds in your favour.

1. Don't worry about trying to time the market.

Let me illustrate what I mean with an amazing fact.  You may have heard the story of a Fidelity study that showed its best performing account holders were ones owned by dead people, because they (being dead and all) never traded anymore… and these untouched accounts easily outperformed the active traders.

Now, as best we can tell that study is just an urban legend, BUT… the idea behind it holds true.

Several studies have shown a direct link between trading activity and portfolio performance.

Summed up: These studies show us the more we trade the more our portfolios may suffer. Trying to sell at market highs and buy back in at market lows can be very tempting, but it's nearly impossible and can lead to severe under performance.

At The Motley Fool we believe the greatest way to achieving massive wealth for ordinary investors is to regularly invest over a long period of time, and not worry about where the market is at any particular moment.

Put simply: Trying to avoid market declines is more dangerous than enduring them.

2. Timing isn't critical to long-term success, but time is.

It seems hard to do, but if you trust the sheer, brute power of time, you can have a much calmer and rational approach to investing.

Here's another way to think of it: Time can help mediocre investors beat great ones. It's true, you can beat Warren Buffett if you have enough time and we give him time constraints!

The practical application here is: Don't neglect your early years, because they are key to adding more time in the market for you and increasing the potential of HUGE favourable swings in the future.

Get started investing as soon as possible and get that compounding machine working for you.

3. 1% makes a huge difference

Averaging 1% more annually can make a surprisingly huge difference over time, so just a little bit of effort on your part could mean jaw-dropping amounts of money over the years.

For someone who contributes $3,000 a year to their nest egg, my research shows earning an extra 1% annually can mean as much as $24,000 to $10 million extra over a lifetime… depending on rates of return and time invested. 

The example here uses 10% annual returns vs. 11% annual returns. 

The difference between averaging 10% per year vs. 11% per year

Years        

Jim: 10% Returns      

Jane: 11% returns      

Difference           

20

$189,007   

$213,795  

$24,788

45

$2,372,386

$3,285,506 

$913,120

65

$16,149,234 

$26,702,572  

$10,553,338

It's incredible! And that's what makes a service like The Motley Fool Share Advisor seem like an answer to a prayer.

How to put this all into action

So if you want to avoid the mistakes I've pointed out and are ready to commit to regular investing over the long term, I don't think there's a better time to start than now, and a better place to start than with Motley Fool Share Advisor.

I mentioned earlier the power of time, and I think some of Share Advisor's early stock picks really show the awesome power of long-term investing (and great stock picking on the part of our team):

  • Netflix recommended in July 2012 has grown 44% per annum (Total return 7,610%)
  • ResMed Inc. recommended in May 2013 has grown 20% per annum (Total return 636%)
  • Amazon recommended in February 2012 has grown 28% per annum (Total return 1,936%)
  • Corporate Travel Management recommended in August 2012 has grown 19% per annum (Total return 638%)

We all know that not every stock pick goes up. And a "sure thing" in the stock market doesn't exist. That's why we recommend diversifying and buying several stocks across a range of sectors.

One reason I think you should act quickly is how easy our team has made it to join up with us today. 

Not only can you join us right now, but new members can do so for far less than others have happily paid, thanks to our "new member" special that we're offering today.

And if you join us today, you'll get instant access to our Five Best Stocks to Buy right now.

These Best Buys Now highlight the five best stocks the Share Advisor team thinks are poised to take advantage of that in the year — and the decades ahead.

This is included along with all our regular stock picks (that's one new ASX and one new US recommendation each month) you'll get with your membership.

All I ask is that you give Share Advisor a fair try, because you'll be protected by our famous membership-fee-back guarantee.

Sometimes the toughest part can simply be getting started. Think about how many investing trends you've missed out on, even though you knew they were going to be big.

Don't let that happen again.

I urge you to take action today so you can learn the time-tested tactics savvy investors are using to systematically build their wealth.

Simply enter your email to learn more.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe at anytime. Please refer to our Financial Services Guide (FSG) for more information.

Returns as of 29 May 2024. Greg Maxwell has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Netflix, and ResMed Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. The Motley Fool Australia has recommended Amazon, Corporate Travel Management Limited, and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. Past performance is not an indicator of future results and all investing involves risk of loss. For more information about The Motley Fool see our Financial Services Guide. All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product.