The #1 Investing Mistake Of 2019

What's the guys? It's Graham here, and you know what? We made it! Congratulations, it's officially 2020. This is the year to destroy the like button for the YouTube algorithm. Plus, as weird as it is to say, we are now closer to the year 2050 than we are to the year 1990. Just think about that for a second and now you feel old.

But anyway, as we enter into this amazing new year of 2020, it's really important that we look back on the history of 2019 so we could learn from our mistakes and improve on them for the future. To do that, we can look no further than the almighty website, wait for it, NerdWallet, who conducted a survey and found that 70% of investors have regrets and wish they handled their money differently. Come on, I gotta say that is unacceptable in this day and age with the ability to access an infinite amount of information within seconds from Google. There's zero excuse for not knowing how to properly manage your finances and to learn how to maximize the return of your investments without any regret.

So let's cover, first of all, exactly what those regrets are, how this could have been avoided, and what you could do to start the year off right by learning from the past, understanding the best ways to invest, and making sure you've always hit the subscribe button if you haven't done that already. So with that said, let's get into the video.

Now, first, let's start off with the biggest investor regret of 2019, with 35% of investors wishing they had invested more money. Frankly, this is an easy one to see why. Over the last nine years, we've heard non-stop talk about this upcoming recession. Since then, people have been sitting on the sidelines, saving away cash and patiently waiting for another 2008-like apocalyptic scenario to wipe out the financial markets. Of course, at that time, they could buy back in for fractions of a penny of what it was worth, and they could make a fortune.

Except, if only it were that easy. See, partially from my perspective, this mentality exists because the 2008 crash was their last reference point as to what a recession was like. It just now seems customary that every 7 to 12 years we'll see a 50% drop in prices, and as long as you could time your buy-ins, you'll do really well. Except we tend to forget that the 2008 financial crisis was potentially a once-in-a-lifetime opportunity, and not all stock market drops and recessions are so dramatic.

If we go and look back historically, we could see that the 2008 financial crisis was really one of the biggest drops over the last 80 years since the 1930s. Even though that does not mean that it's impossible to experience another life-altering price drop in the near future, it does put in perspective that overall, not all price drops and recessions are so substantial. Not to mention, 2018 in itself was not really a good year for the markets when we saw an 18% drop in the S&P 500 within just three months, and that led to the entire year of 2018 finishing off with a 6% drop in prices.

In fact, 2018 was one of the few years where cash was the best performing asset, meaning that if you just didn't invest and did nothing but keep your money sitting in a bank account, you would have outperformed pretty much every other investor. But we're doing that. We fail to remember that past performance doesn't indicate future results, and just because we saw a sudden 18% drop in prices does not mean that will continue into the next year. Because, as we now know, cash was quite the loser this year, and the stock market recovered up a whopping almost now 30% since January of 2019.

So it's really no surprise that now in hindsight, investors wish they had more money invested. Of course, in terms of what you can actually do about this information and how you should be changing your investing strategy for 2020, the answer is actually really simple: it's just do nothing. Here's what I mean and here's what I've learned. Every news outlet and investment website out there just wants one thing: to get you to click. And yes, that applies to me too. I'm not exempt from this.

My videos are geared around trying to get you guys to click on the video, watch them to the very end, and hopefully, if I ask nice enough and the information is good enough, you guys hit the like button for the algorithm. Unfortunately, the reality is that sensationalized fear-based news gets the most views, plain and simple. Even with this video, there's a reason why I focused on biggest regrets instead of biggest accomplishments, because regrets have a more powerful connotation, and because of that, you're more likely to watch it and retain the information.

But with that, unfortunately, comes a whole bunch of non-stop fear-mongering articles yelling about a recession each and every year until eventually one of them is right. Just to show you some proof, here's an article from 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, all talking about the upcoming recession, which has yet to happen. So given this, the only solution to this horrible, horrible problem is just to ignore all the expert financial analyst predictions and just do one thing: invest consistently and hold long-term.

Well, now I guess that's two things: do two things. By doing that, all that means is that if the markets go up, great, you make money. If the markets go down, great, you now bought at a lower price. So given that you're investing money that you're not really going to be needing for the next few decades anyway, you'll have more than enough time to recover from a recession if and when it does happen. So in a sense, if prices do drop down, you shouldn't really care too much about it.

But in terms of when a recession will happen, the answer is that no one knows. Pulling your money out of the markets will end up losing you more times than you will end up making money. I will cover that very shortly because now we should talk about the second most regretted mistake of 2018, and that was by not investing aggressively enough. Again, here's the thing: it's easy to regret not having invested aggressively enough when you see that Apple is up 85%, and AMD is up 145% just this year.

Or in other words, when things are going good, it's very easy to wish you had a higher risk tolerance. Everyone would. It's a little bit like saying, "I wish I put all of my money on red at the roulette table," after already seeing that the roulette table spun red. But here's the thing: I guarantee 100% that if 2019 were a losing year for stocks, those very same investors would now have regretted being too aggressive with their investments. So no matter what, you're always gonna have people regretting what they did not do that would have made them the most money that year.

Sadly, none of us have access to a crystal ball that will predict what the markets will be doing and which stocks are gonna be going up, except for maybe Martha Stewart. But that's bad. Don't do that. Don't do anything illegal. Ah, you're gonna have a bad time. Point being, instead of having regrets about what you should or shouldn't have done, you should always be investing based on the time frame for which you'll need the money, based on your own personal risk tolerance. Not to be confused with the Robinhood infinite money glitch.

Anyway, here's what I mean, and this is all you need to know about investing: number one, if you're investing money that you're going to need in the next few years, then chances are it's not a good idea to invest in anything speculative or risky. This is because if the investment goes south and drops in price, you might have enough time to recover from that by the time you actually need the money. So it's best not to take any risk with money you cannot afford to lose. On the other end, if you're investing money that you're not going to be needing for decades, then what does it matter if one year drops 35% in price? You don't need the money anyway!

And now that gives you a good opportunity to buy even more at a lower price. That way, by the time it goes back up in price, you're going to be in such a good position to make even more money. Second, if you invest money and you find yourself panicking every single time it drops a few percent in price, chances are you invested more money than you should have. You didn't research the investment as well as you could have, and you'll either need to make safer investments in the future or just remind yourself that investing is very much like a yo-yo and those price swings up and down are very much just normal.

This is also why it's so important that you understand the benefits of dollar-cost averaging because most likely, chances are you're not just gonna make one single investment one time and that's it for your entire life. If you're like most normal people, you're gonna be investing a consistent amount every day, every week, or every month over decades. Some years are gonna be high; other years are gonna be low. But overall, you're gonna be so much better off investing immediately and consistently than trying to time the markets perfectly.

And here's proof of that: a few months ago, the Reddit user named Juror had analyzed the last 40 years of the S&P 500 and simulated three investing styles. Tiffany had the worst timing in the world and saved $200 per month in a high interest savings account, only to invest it entirely in every single market peak right before a crash. But even doing so, after 40 years, even though she had the worst timing possible, her $96,000 investment still turned into a $663,594 mini fortune.

At the same time, though, we also had Britney, who had the best timing in the world. She saved her money and invested all of it precisely at the bottom of every single crash. Even though it would have been virtually impossible to perfectly time the market as well as she did, down to the very day, her $96,000 investment turned into a $956,838 amount today. And then lastly, we have Slow and Steady Sarah. She's like a honey badger and just doesn't give a f---. All she does is set $200 per month to automatically invest in the stock market, regardless of what the news outlets say in regard to where the prices are. And guess what? After 40 years of doing that consistently, she now has $1,386,429 today!

That just goes to show you with real numbers and real data that trying to time the market is horribly inefficient. It's best instead to invest consistently up to your own personal risk tolerance and then just do nothing. It's really as simple as that. With that, leads us perfectly to the third biggest regret, and that is wishing they had made more trades. Unfortunately, this is another one that's easy to point to in hindsight after already seeing how the markets performed.

But in reality, not trading enough is only a reflection of the information that you know in the moment and based on how well you understand that particular investment. Now, those that know me know I am NOT a huge fan of buying and selling individual stocks. I'm not saying it cannot be done successfully, but I really believe for the majority of people out there, the best bang for the buck, so to speak, is really just investing in a broad index fund. In that sense, it's a lot of work for most people to go and individually analyze every stock, then to time their buy-in, and then not to get emotional over what happens—or in other words, not get FOMO when the price goes up and then not panic when the price goes down.

In terms of actual proof of what I'm saying, there have been multiple studies that have been done that showed that on average, the more someone trades, the worse they end up doing. For example, Brad Barber and Terrance Odean analyzed 66,000 households between 1991 and 1996 and found that the investors who traded the most often earned an annual return of 11.4%, which sounds pretty decent until you realize that the overall market went up 17.9% during that same time period. The reason for this discrepancy was actually pretty simple. First, it was found that people are just really bad at timing the markets and either miss the best opportunities to buy in or just wait too long to invest.

Secondly, investors who buy and sell frequently are taxed at a much higher rate than long-term investors, and that all needs to be factored in. So to me, not trading enough is a very strange regret to have, and you can't really have that regretted until you've already seen how a particular investment unfolds, which come on, you can't do that if you're not psychic.

Then that brings us to the fourth biggest regret that investors had, and that is those who wish they'd invested more conservatively. Kind of like this guy. Or, that's all the investors who put their money in medical—you know what stocks. I can't say it because YouTube will shadowban me or any video that mentions medical—you know what stocks, because that's a taboo topic. We don't talk about that here on YouTube. But yeah, if your biggest regret was not investing more conservatively, then that's a strong indication that you should reasonably adjust your expectations. If you can't cover any potential loss, you should not be investing that much in speculative investments in the first place. And especially if the overall market is up 30%, and your biggest regret is not being a more conservative; to me, that's not so much investing, but instead, it's more like gambling.

Oh, and then from here, these regrets just get more and more interesting. For instance, this next one is that 9% of investors regretted not buying into an IPO stock. Like, really? That was your regret? We all know those investors just wish they had bought Beyond Meat the day it went on sale and then sold it two months later at the peak. Which really, at that point, it may as well just say, "My biggest regret was not picking the winning lottery numbers on August 24th," after already knowing what the winning numbers were. Because really, if your biggest regret was not investing into an IPO stock in 2019, then you really need to examine your life.

Hit the like button and then go and look at Uber's lifts and see how those did. Then after that, we get investors wishing they sold off more investments and those who regretted selling off less investments or investing less money. All of these, to me, just say that they didn't properly analyze what they were doing. They played it too risky or played it too safe, and they were not prepared for the outcomes of the investments that they made. All of that could have been avoided ahead of time by having a strict plan based off your income, your savings goals, and your investment time frame, and then just sticking with it. In fact, the only regret in the entire list that actually makes some sense to me at least, because they've learned from their mistakes, is those who wish they would have traded less.

This is because the longer you are in the market and the less you trade, the more likely you are to come out profitable. For example, if you look at the Dow's worst 20-day performances, you'll notice that the majority of the best single-day point increases tend to occur within roughly two weeks of its worst single-day declines. That means that if you happen to sell off your investment to wait for the market to drop even further, you might just miss out on some of the most profitable trading days out there. Over 15 years, if you just kept your money invested in the S&P 500 and didn't do a single thing, you'd have a 7.7% return. But if you sell and just so happen to miss the ten most profitable trading days over 15 years, your return drops to 2.96%. And if you happen to miss the most profitable 30 days, your return becomes negative!

That just goes to show you that overall, trading less will end up making you more money. So it's a lot better to have your money invested in the market instead of pulling it out and then putting it back in again. That's what she said. And then of course, lastly, we have my favorite group from all of this, and that would be the 30% of investors who have no regrets because they're the ones who understand the principles of long-term investing and smash the like button in the very beginning before the video even starts because they appreciate all the free content.

But seriously though, any time it comes to investing, we could really only make decisions from the information that we know in the moment, and we can only base our overall investing plan from how those investments have performed previously, our time frame for holding those investments, and our tolerance for the fluctuations in price. If you find yourself really worried about all of these price movements and fluctuations, just remind yourself that that is a normal part of investing and view it as an opportunity to buy even more at a lower price. If the market drops 40% this year, as long as you don't need the money in the short term, you're gonna come out of it okay.

That's why it's really important to have an emergency fund, keep your expenses low, and save as much money as you can because doing that is gonna help you ride through whatever happens with the market without you having to worry. And that way too, if the market ends up going up in price, you ended up investing as much money as you felt comfortable, and that worked out in your favor because you didn't have any extra money sitting on the sidelines.

When it comes to investing, especially in 2020, all that really matters is just consistency. It's really such basic advice, but it's always so true: time in the market will always beat timing the market. Every single time over the last 100 years, just buy and hold. Don't try to trade too often, don't get emotional about it, buy, hold, and that is it.

So with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you have not already destroyed the subscribe button, make sure to do that and hit the notification bell so YouTube notifies you anytime I post a video. Also, feel free to add me on Instagram; I post there pretty much daily, so if you want to be a part of it there, feel free to add me there and on my second channel, The Graham Stephan Show. I post there every single day. I don't post here, so if you want to see a brand new video from me every single day, make sure to add yourself to that.

And lastly, if you guys want to get free stocks, use the link down below in the description. WeBull is going to be giving you 2 free stocks if you deposit $100 on the platform, and one of the stocks is going to be valued up to $1,000. So again, 2 free stocks, link down below in the description, deposit $100, enjoy two free stocks. Let me know what you guys get! Thank you so much for watching and until next time!