"Don't Do This!" Top 3 Reasons Why Beginners Lose Money in the Stock Market

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I decided to start investing back in early 2010. This was – hands down – one of the best decisions I’ve ever made. It led to me being able to quit my job in my early 30s after becoming financially independent.

I’m now able to kind of do whatever I want in life, largely because the passive income from my investments is enough to cover my bills. This freedom, guys, is priceless.

So if you’re just starting investing, you have so much to look forward to. But if you are just starting out, there are a lot of mistakes you definitely want to avoid making.

I’ve interacted with a lot of newer investors, and many of them have something in common. They make the same exact mistakes as one another.

These mistakes can cost you a lot of money. And since time is money, this means you don’t reach your goals as fast as you ought to.

Today, I’m going to share with you the three biggest mistakes I see new investors making, so that you can avoid making these mistakes.

New Investor Mistake #1: Focusing on a Stock’s Price Instead of Its Value
One of the most common mistakes I see new investors make is to focus on stock price instead of stock value. What I mean is, they try to buy stocks with low nominal dollar prices.

So new investors, not really understanding or knowing what they’re looking at, will seek out stocks with very low nominal dollar prices. It’s often penny stocks we’re talking about here. Stocks that are maybe a few bucks per share. These investors shy away from buying stocks that are priced at over $50/share. Stocks that are over $100/share? Forget about it. But here’s the thing.

Price is what you pay. Value is what you get. Focus on value, not price.

It’s a huge, huge, huge mistake to focus on price instead of value. A $1,000 stock can be cheap if it’s worth more than $1,000. And a $1 stock can be expensive if it’s worth less than $1. You have to compare what you’re paying to what you’re getting for the money.

New Investor Mistake #2: Focusing on the Number of Shares You Can Buy
Another common mistake new investors make is focusing on the number of shares they can buy at any given time.

This relates to the first mistake. Let me tell you something right now. Nobody cares how many shares of a company you own.

There’s nothing special or magical about owning 100, 1,000, or 10,000 shares of a company. You don’t get the key to the city if you own 10,000 shares of something. Nobody is going to call you and congratulate you. Owning a lot of shares, in a vacuum, by itself, means absolutely nothing. So focusing on stocks with lower nominal dollar figures, just so that you can buy a lot of shares, is a tremendous mistake to make.

Which would you rather have? 1 A share of Berkshire Hathaway? Or 10,000 shares of a stock priced at $5?

New Investor Mistake #3: Chasing Yield
Perhaps the biggest mistake I see new investors make is to chase yield.

Don’t chase yield. Let me repeat that. Don’t chase yield. One more time. Don’t chase yield.

I don’t know how many times I’ve gotta say this. It seems like this mistake has ensnared every single new investor I’ve ever come across. Even now, we get comments on videos almost every single day from new investors asking about this high-yield stock and that high-yield stock.

You know what they call a high yield? A sucker yield. They call it that because it suckers you into buying the stock, even though you’re getting a junk business for your money. Then you end up, yep, the sucker. Because you’re taking on a ton of risk, yet also typically getting poor long-term returns.

If you’re primarily looking at, or primarily investing in, stocks with yields that are five times or higher what the market yields, you are chasing yield. If your portfolio is full of, say, 10% yielders, you’re a yield chaser.

When I first started investing, even I got enticed by high yields. So I understand the appeal.

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