The 5 WORST Investing Mistakes for 2023 (Investing for Beginners)

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Okay, so 2023 is your year. You're finally getting serious about your investing, and you're going to take the time to knuckle down and set yourself up for financial freedom. That's awesome! But as you guys probably can expect, sometimes investing is not as simple as one, two, three.

So in this video, let's discuss five common investing mistakes that a lot of the time people don't even realize they're making. Mistakes that are going to be specifically relevant for the 2023 investing environment that we're going to face. That being persistently high inflation, rising interest rates, a stock market that is trending down, and also widespread pessimism. Doesn't that sound cheery?

Okay, let's get started. So no time to waste, let's get into mistake number one. This is a very common trap people fall into, and it's going to be particularly damaging in 2023. So what is it? It's listening to predictions about where the stock market is headed. Never, ever, ever do this!

Because as much as I'd love to be the case, absolutely no one on earth can predict which way the stock market is going to go in the short term. It just can't be done. But what's super annoying is the truckload of media coverage that is trying to convince you that actually someone they had on the show or on the program yesterday actually does indeed know where the stock market's heading. That is complete BS, and the only reason that the mainstream media does this is because they know that suckers love to click on that content. They don't do it because it's helpful; they put it out because it makes them money.

And what's crazy is it's a lot more formulaic than you think. Studies have shown that when the stock market is rising, the media coverage is proven to be overly optimistic. And then, when the stock market declines, the content turns overly pessimistic. It's actually crazy, but it's true. They're just trying to get you to click, so please don't fall into the trap. It'll only lead to poor results.

Remember Buffett's bet in 2008? He actually bet these hedge fund bigwigs that you commonly find on CNBC that they couldn't even beat the market over a 10-year period. And Protege Partners actually took on the bet, and they lost horribly. That's very much the usual story as well in America. 89% of these active fund managers on CNBC don't even beat the S&P 500. So how valid does it make their stock market predictions, exactly?

Alright, moving on from here. Mistake number two is selling a great business because it's going down. This is really silly! Sometimes your emotions really get the better of you, and you feel that pressure to sell from the market declining. You know, or if I take a 30% loss now, maybe I'll avoid a 50% or a 60% loss.

But this line of thinking of selling a stock because it's going down is really, really flawed. Remember when stock prices go down across the board? If you're looking at high-quality businesses, then that is a sale. It's exactly the same as walking into a department store and seeing 50% off signs. When that happens, you don't feel worried, do you? You know, you get excited. Everything's super cheap. The same should happen when you see the stock market crash.

But as they say, the stock market is the only place where shoppers run out of the store during a sale. It's bizarre! Overall, if you know you hold great quality businesses with strong moats and a very low risk of bankruptcy, don't get caught selling just because the price is bobbing around. Don't guard into your loss; that's absolutely pointless.

Listen to Warren Buffett talking about this: "If you worry about corrections, you shouldn't own stocks." I mean, if you can't take your stock going down, it's going to go down sometime if you own a stock. So why worry about it? I mean, the point is to buy something that you like at a price you like and then hold it for 20 years. You should not look at it day to day.

If you bought a farm or an apartment house, you wouldn't get a quote on it every day or every week or every month. So it's a terrible mistake to think of stocks as something that bob up and down, and you should pay attention to those bobs up and down. Wise was Mr. Buffett in tough times like right now. Just check whether you hold a great business, and if you do, just carry on as per normal.

Alright, here's another big mistake you need to be cautious of this year. Mistake number three is burying your head in the sand. As an active investor in the stock market, you need to keep your finger on the pulse. No, you don't need to stress and believe everything you see on CNBC; that goes back to point number one. But you do need to avoid making investments and then just forgetting about them.

And this normally happens when you end up sitting on a decent unrealized gain. You know, a lot of investors made a killing on paper in 2020 and 2021, but if they got complacent, well, 2022 would have humbled them a little bit. Personally, one resource that I use to avoid making this mistake is Morning Brew, who are also the sponsor of this video.

So I'm a fan of Morning Brew because it's a five-minute daily newsletter, and it goes through all the most important news headlines in finance, business, and technology. It's actually really enjoyable to read. It's written in a very easy-to-understand format, and a lot of the time they can actually blend in some humor quite well as well. It actually makes it enjoyable to read.

And the best thing is that the newsletter is, of course, totally free to subscribe to. So if you're interested in a simple way to get the most relevant news sent straight to your inbox, then give it a go! You can subscribe to their newsletter via the link in the description or in the pinned comment. And also, if you do sign up, that helps out the channel quite a bit as well, so give it a go if you're interested.

And of course, thanks to Morning Brew for their support of the channel. So as I'm saying, yes, in the stock market, you have to be sure to stay up to date. Yes, keeping up to date with what's going on in the market is obviously helpful without getting sucked into the noise, obviously. But also, if you've invested in individual businesses, you need to ensure that the fundamentals stay up to scratch and the story doesn't change on you.

This will be particularly relevant in 2023 because the macro is changing so rapidly. And with that said, that leads us straight into mistake number four that is very relevant to 2023, and that is trying to make bets based on macroeconomic changes. For those that don't know, macroeconomics is looking at things like economic output and interest rates and inflation or foreign exchange rates.

And let's be real, this is basically all the news is focusing on right now because there is a lot going on in this space. And yes, it is important to understand macroeconomics, but should you be focusing on it and making bets because of it? Absolutely not! Why? Because this stuff is totally unknowable, kind of like making stock market predictions. Nobody can make accurate macroeconomic predictions, not even the central banks who control a lot of these levers.

So trying to predict where interest rates will be or what inflation will do is really just a waste of time. And it's an even bigger mistake to try and make investments based on those factors. The best investors in the world typically ignore that stuff, and instead, they focus on the underlying strength of the individual businesses that they want to invest in. They definitely understand the macroeconomic landscape, but they don't let it interfere with their investment decisions. That's how they get killer results.

They buy businesses that are so strong, they come out ahead no matter what the macro does. I've played this clip a million times, but have a listen to Peter Lynch talking about this: "If people get too carried away and, first of all, they try and predict the stock market, that is a total waste of time. No one can predict the stock market. They try to predict the interest rates. If anyone predicts interest rates right three times in a row, they'd be a billionaire, and no one could predict the economy."

So what I'm trying to tell you, it'd be very useful to know what the stock market is going to do. It'd be terrific to know that the Dow Jones average year from now would be X, that we're going to have a full-scale recession, or interest rate is going to be 12 percent. That's useful stuff; you never know it, though. So I've always said if you spend 14 minutes a year on economics, you've wasted 12 minutes. And I really believe that.

So, as Peter Lynch says, don't waste your time on the macro. And then from there, the last big mistake that is particularly relevant to 2023 is trying to get in at the bottom of the market. Yes, the stock market has been generally trending down over the last 12 months, and it may continue to do so across the next 12 months. But to think that you're the investing genius that is going to perfectly drop your life savings into the market at the lowest point? It's just not how it works.

And honestly, if you think like that, you're going to be trapped in a never-ending cycle of either disappointment because you didn't quite get the bottom, or frustration because you can never invest anything because you're just sitting there waiting for the stock market to crash even more. Even back in 2017, 2018, I thought the stock market looked way too hot. But if I'd actually stayed out of the market and waited for a stock market crash before I started investing, I would have missed such an amazing run—so many returns!

So looking back at that time, it was a much better idea as a long-term investor to just get started and take advantage of each individual investing opportunity as they did come up, as opposed to waiting for years for that big stock market crash and then trying to time the bottom of the market. For example, let's play a game, okay? I'll put up the GFC returns on the screen. Back in 2008, you tell me where the bottom is. You ready?

Alright, is it here? Alright, not quite. Alright, what about here? No, maybe here? We call them at the bottom? We all agree that's the bottom, Matt? No, definitely not. What about here? Come on, surely, surely that's the bottom. Well, no.

Okay, well, what about now? No, surely not! That cannot be. There's got to be another bottom. Okay, keep fast. Oh hang on a second, that actually was the bottom! As you can see, it is impossible to predict, so just don't.

But look at this: if we had invested, say, at any point along that downward slope, fast forward to today, we are doing just fine! Trying to pick the bottom, it's just not possible. So don't do it!

Anyway, guys, those are five investing mistakes that are all very relevant to today's environment. Thanks very much for watching! I hope you guys got something out of this video. Leave a like on it if you did. Of course, just one more mention: if you wanted to check out Morning Brew, I would really appreciate it! It is free to do so, just give it a try. You know, help you stay up to date with the market.

But apart from that, guys, thank you very much for watching, and with that said, we'll see you in the next video!