5 Beginner Investing Mistakes I'll Never Repeat (After 17 Years of Experience)

Did you know that most stock investors make mistakes which reduce their lifetime profits by 20-50%? Over my 17 years of professional experience, including my time as the CEO of a European investment company, I've invested hundreds of millions of euros for thousands of clients. In this video, I will show you how to avoid 5 expensive mistakes that I've seen my clients make again and again. Now, I saw the first mistake in action just recently when Trump announced tariffs in early April and the market dropped. A friend called me up and said, Listen, Tom, this is not good. I want to sell my US stocks. I told him, Well, you do what you have to. Just keep in mind that predicting market moves is really difficult. A few days later, Trump delayed the tariffs and the market bounced back up. My friend called again and said, Maybe I'll wait before selling those stocks. And then the market dropped once more. And my friend told me, I sold the stocks. It's too much risk for me. I'll wait for the market to calm down and then let's see. And I just wanted to scream because this was such an obvious example of what not to do. Now, if the market crashes and you're freaking out and you can't sleep and you are really unhappy, it's perfectly fair to say, Okay, I took too much risk for my personal comfort level, so I will sell some stocks and going forward, I will invest more conservatively. But if your plan is to sell when things get tough and then wait until the market calms down and start investing again, well, you're making a big mistake. And this first mistake is called buying high and selling low. You only invest when you feel comfortable. And that's typically when the market is up and stocks are expensive. And you sell when you get scared. That's when the market is down and stocks are cheap. With this approach, you shoot yourself in the foot while feeling like a smart, cautious investor. Here's the second mistake, and this is also something that I see happening around me right now in the spring of 2025, where Trump's starting a global trade war. It's assuming that today is a special time, different from everything that has come before. Since the beginning of the 20th century, global stock markets have seen many big crashes, crises and disruptions. At one point, the entire stock markets of Russia and China shut down when these countries turned communist and foreign investors lost everything. Two world wars devastated the global economy. Investors lived through the Great Depression in the 30s and stagflation in the 70s and the dot-com bubble and the big financial crisis and many other problems. And despite all these situations, long-term stock results have been remarkably strong. But when a crisis happens today, for example, when Donald Trump puts tariffs on everybody and disrupts the role of the United States on the global stage, it all feels much more dramatic and threatening and fundamentally more problematic than all those past events from the history books. And that's because we are living through these events in real time. We wake up and see scary headlines in the news. We see losses in our personal brokerage accounts. And unlike with historical events, we don't know what comes next. So this leads us to the second mistake. Assuming that this time is different, so the old rules of investing no longer apply, it is much more likely that today is not so special and that patient investing in a diversified stock portfolio will win the day as it always has before. Before I share the third mistake, which is particularly dangerous for beginning investors here in Europe, here's an idea. I share insights like this every week in my newsletter for European investors. Just follow the link in the description to sign up. Okay, so the third mistake happens because too many people have the following false belief. Investing in stocks is more risky than keeping cash in the bank. Even many experts believe this, but especially in light of some recent research that I will explain in a moment, this is not quite correct. And to understand why, think of babies. When learning to walk, a baby gets up, takes a step, and falls over. Then he or she gets up again and falls over again, and sometimes they hit their nose or lip and there's some blood. As parents, we want to keep our kids safe. So the safest thing would be to tie your baby down and have them never try to walk, right? Well, obviously, that would be a horrible idea. This attempt to reduce short-term risk would create huge long-term problems for the child. And with stock investing, it's the same. People get hyper-focused on short-term risk, how much your portfolio goes up and down. And the truth is, when you put your money in the stock market, your portfolio will go up and down. You will get some bloody noses, okay? The market drops 10%, 20%, or even 30% occasionally, and that is perfectly normal. And people get scared of this and decide that it's safer to keep your money in the bank. Of course, it's true that your short-term risk will be lower this way, but long-term, this is a horrible choice because your money is guaranteed to lose value to inflation. If prices go up just 3% per year, in 20 years, your savings will be able to buy only half as much as today. And that means you will never build meaningful wealth. By contrast, if you invest in stocks, and if you follow some basic rules about diversifying across many different stocks, industries, and regions, then over the long term, you are virtually certain not just to beat inflation, but to make a lot of money. And here's this controversial finding from recent research that really surprised me. The traditional investment advice is that as you get older, you should reduce the risk in your portfolio. The thinking is that young people can afford to take a lot of risk, they can put everything in stocks, but as you get older, you should be adding safer investments like bonds to your portfolio. And this way, you reduce the risk that a big market crash could wipe out your savings right before you retire. But over the past few years, Professor Scott Sederberg and his co-authors have published research suggesting that this is wrong. Because of inflation, seemingly safe investments like bonds are very likely to really hurt your wealth, no matter how old you are when you add them to your portfolio. If your goal is to make sure that you don't run out of money before you die, then your smartest strategy could actually be to keep 100% of your investments in stocks all your life. And that's from age 20 to retirement and beyond. Yes, you will experience sharp drops from time to time, but long term you will be much better off. Now, I don't necessarily think this is the right recommendation for everybody, because you also have to think about the psychology of investing. When you get close to retirement, it can become very hard to stay calm when your portfolio drops by 30 or 40% in a big crisis. And this can lead people to make some very expensive mistakes. So I do think that having some less volatile investments in your portfolio, some bonds for example, can make a lot of sense. But the point remains, for long term investors, stocks are actually one of the safest investments out there. And when people don't understand this, they make the third fatal mistake, which is keeping too much money in the bank and under-investing in stocks. Now let's look at the fourth mistake. But first, let me ask you a question. Over the past century, the average dollar invested in US stocks earned around 10% per year. The American stock market was hugely profitable. But what if you picked an American stock at random over the past century? How much money did this stock make for investors? Can you guess? Well, even most professional investors get this question wrong. They will guess 5% per year, or 7%, or something like that. Professor Hendrik Besenbinder of Arizona State University studied this question, and here's what he discovered. The average stock actually earned investors a little less than zero. In other words, the average stock lost investors money. If you invested broadly in the whole market, you made a lot of money, but most of that profit came from just a few really successful stocks. If you just picked one or two stocks at random, chances are that your portfolio went down over time. Now, you might be thinking, OK, well, I'm not planning to buy random stocks. I will buy the really profitable stocks. But the problem is, predicting which stocks are going to be profitable ahead of time is extremely difficult. Because by the time a company is clearly doing well, the stock price is already high and making easy profits is no longer possible. Many people who try this get burned and lose money instead. If you don't understand this, you will make the fourth mistake that I see hurting European investors all the time, and that is picking individual stocks. It is much easier, and usually much more profitable, to invest in a broad, diversified portfolio with index funds and ETFs. Now, to explain the fifth mistake, imagine that you're on a roller coaster. At the start, you slowly climb a big hill. Then boom, you drop straight down. It's fast, it's scary, and you love it. Up and down you go, twisting and curving, over and over again. But at the end of the ride, you're right back in the station where you started. So what if someone said, the average movement on this roller coaster is zero? Would that be informative? Well, of course not. That wouldn't tell you anything about how wild, fun, or terrifying the ride actually is. And the same problem applies to average stock market profits. Let's say the US market earned 10% per year over the past 100 years. That's a fantastic result. But you could get this average result many different ways. Some people assume it's like a steady escalator up. They expect a typical year to give them profits of 9 or 10 or 11% with only occasional disruptions. But in reality, the stock market is a roller coaster, except it's a roller coaster that generally goes up over time, not down. And this leads us to the fifth mistake, expecting steady profits. If you get a few really profitable years, like 2023 and 2024, when the S&P 500 went up 26 and 25%, that's great, but don't expect it to continue that way long term. If you get really bad years, like 2008, when the market dropped 37%, don't be too shocked. To succeed at stock investing, you should expect a wild ride. You will only get good long term returns if you stay calm as the market roller coaster goes up and down. Now if you live in Europe and want to start investing, you probably have many questions. What investments do you choose and how do you buy them? Which investment app is best and how do you handle taxes? If that sounds familiar, you should watch this video next where I explain the best way to start investing from Europe.