Finance expert and YouTube personality Jaspreet Singh has plenty of useful tips for financial literacy, but none may be more important than his latest video on investing mistakes that will cost you thousands. In the video, Singh details seven things you shouldn’t do if you’re thinking about investing because they will cost you money instead of generating profits.
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If you’re new to the world of investing and looking to improve, heed these tips from Singh and watch your money grow. Singh admits up front that he’s made plenty of costly mistakes throughout his financial career, but at the same time, he’s learned a lot.
Here’s what Jaspreet Singh says about avoiding the following seven investment mistakes that could cost you dearly.
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How to trust a random person with your business decisions
Singh recalled making the mistake of listening to a Detroit contractor about buying a property. It was only Singh’s third time buying real estate, and instead of doing his research, he followed financial advice from someone he didn’t know.
“…after I bought the property, I realized that the only reason my contractor wanted me to do this deal was because he needed money,” Singh shared. “So I wrote him a check to do that work. He took the money… and did other things with it. He didn’t do the work on my property. I had to find a new contractor to do the work. I had to pay the new contractor to do the work. The second contractor botched the job. And we realized that this property had a lot of problems.”
Singh eventually sold the property at a loss because he didn’t want to deal with all the problems that had built up.
“But I learned that if I invest my own money into a business, it’s my decision, not anyone else’s,” Singh said. “Always do your own research because no one is going to care as much about your own money as you do.”
Don’t put all your eggs in timing the market
“If you can time the market perfectly, you will make a lot of money,” Singh shared, offering the example of how much people could make between 1930 and 2020 if they only invested on the best days and avoided the worst.
However, Singh noted that this is somewhat impossible.
“The problem is that you probably can’t time the market perfectly,” Singh said. “So for most people, the best option is to keep their money in the market for a longer period of time…”
However, Singh noted that it is possible to take advantage of recessions.
“You can take advantage of dips to enter and buy more aggressively. You can get even higher returns that way. But you can’t time the market perfectly,” Singh continued.
Singh recommended creating a set-it-and-forget-it system, where you invest on a schedule that works for you and with an amount you’ve appropriately budgeted.
Being stingy is one of the most expensive things you can do
Singh noted that you might think you’re saving money by hiring someone who offers a lower cost for their services.
Unfortunately, Singh found out the hard way that you often get what you pay for: while the price may be lower, it ends up costing you more in the long run.
“Especially if they are people who are working to make you money,” Singh said. “You want to make sure that you have someone who is looking out for your interests and making sure that your businesses, your properties, your investments are maximizing your income rather than something that they are just putting on the back burner.”
Not understanding what it means to diversify
Singh began this advice by quoting Warren Buffet, who said, “Diversification is for people who don’t know what they’re doing.”
Singh’s take on diversification is that it all comes down to your goals and your outlook on money.
“If you don’t trust yourself as an investor, you want to diversify because if you do something wrong, you have a plan B,” Singh explained. “But if you trust yourself and you want to see the big potential returns and go all in, then you don’t diversify, but you have to understand that you’re taking on all the risk.
“What you do is up to you,” Singh said. “True diversification means investing your money in different asset classes.”
These classes could be stocks, real estate, your company, and anything else that fits your investment goals.
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Don’t exchange news
When it comes to stock market news and personal investing, Singh commented, “…it’s easy to get caught up in what’s happening day to day because the stock market can go up and down in the blink of an eye.”
Singh suggested not getting carried away by the emotions that accompany market swings. “You don’t want to be the character who chases and follows these emotions because in the long run, the stock market follows fundamentals and financials. As an investor, you want to invest your money for the long term.”
Don’t ignore your costs
Singh described how two types of costs (fees and taxes) destroy all the wealth you’re building.
As for fees, Singh noted that if you “…invest your money in the stock market through funds, there are some funds that will charge you higher fees than others.” Most likely, it will be an expense ratio that comes in at 0.07% or 0.85%, which can make a big difference in how you build your portfolio.
On taxes, Singh said, “…our tax code has a lot of interesting loopholes, especially for investors… You have to understand that taxes are a huge cost, but as an investor, you may pay less money in taxes because that’s what the tax code says.”
Don’t live off your assets
Instead, Singh advised living off your income. This will help prevent any financial disaster if the economy takes a hit.
“This is what has destroyed so many investors, including those who have become billionaires,” Singh said. “This is why so many investors end up bankrupt. Because they stop living off of income and start living off of capital.”
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This article originally appeared on GOBankingRates.com: Jaspreet Singh: Don’t Make These 7 Investment Mistakes That Could Cost You Dearly
