Number one, trading instead of

investing. Back in 2007, when I was a

young banker on Wall Street, I got

excited about day trading. So, day

traders make quick bets on stocks or

currencies or crypto. You buy at 10:00

a.m., you sell at 10:15, you make a fast

profit and repeat. To younger me,

trading seemed super exciting. I was

sure I was about to get rich. But it

didn't go that way. I remember betting

on Boeing stock only to watch it crash

or selling a losing stock just before it

shot up in price. I just couldn't make a

consistent profit and I felt horrible

about it until I looked up the data and

discovered that the vast majority of day

traders lose money. I have known a few

successful traders over my career in

finance, but most of them work for a big

bank or hedge fund. They trade with

other people's money. Most small traders

who play with their own money end up

losing. And to me, this makes trading

one of the worst ways to spend your life

because it takes a huge amount of time

and effort and your average expected

result is negative. Today, instead of

trading, I invest my money. As an

investor, you'll find valuable assets

that create wealth for you. These are

investments like stocks or real estate

that grow in value over time, that give

you cash flow, give you an income. So,

you find these investments and you hold

them long-term and you allow them to

make you wealthy. This works much better

than trading. And the best part is it

leaves you free to spend your time on

your job or business or family or

hobbies instead of staring at market

charts all day long. Next mistake,

investing naked. No, I'm not talking

about flashing your neighbors as you buy

a share of Tesla. I'm talking about the

mistake that my friend Jerome made back

in 2009. It was the middle of the

financial crisis. Stocks were down 50%

and Jerome sold half his stock

portfolio, not because he wanted to. He

knew that the market would recover, but

he had just lost his job, and he simply

needed the money. Jerome's mistake was

investing naked. He didn't have a safety

cushion to spend in case of emergencies.

If you invest without a safety cushion,

you will be forced to sell at the worst

possible time. So, always keep a bit of

cash in the bank. Next, not investing

enough. Look, I'm embarrassed to admit

it, but even though I learned how to

invest on Wall Street 18 years ago, I

only started investing significant

amounts of money around 9 years ago when

my son was born, and I realized that I

needed to get serious. I had all this

investing knowledge, but for years, it

gave me close to zero benefit. The thing

is, investing can only multiply the

money that you put in. If all you invest

is €20 a month, well, that's a good

start, but it's only a start. Let's run

some numbers to understand this better.

Let's say you have no savings to start

with and you invest €20 a month and you

get a profit of 9% per year. So, that's

a pretty good result, right? Well, if

you do this for 10 years, you will end

up with €3,800.

Now, that is something, right? But it's

not a life-changing amount. To get real

significant results, you will probably

want to invest €200 per month when in 10

years you might have 38,000 or in 20

years that would give you 128,000. This

kind of money can already have a big

impact. It can be enough to start a

business or buy a property. Okay? So, if

you want investing to change your life

in a significant way, you need to invest

a significant part of your income. The

more you put in, the more you get out.

Here's a related mistake, overestimating

risk. I think one of the reasons I

delayed investing for years is that I

started my career in finance back in

2007. That was right at the start of the

financial crisis. I sat on the biggest

trading floor in the world at UBS as the

stock market kept crashing and crashing

and crashing. As major banks like Lehman

Brothers and Bear Sterns collapsed, as

my friends and colleagues lost their

life savings, it seemed like there was

no safety anywhere. And even though

intellectually I understood the power of

investing, even though I knew that the

market would eventually recover, I think

that this early experience scared me off

for a long time now. Over the following

18 years as a finance professional, I

have lived through various market dips

and crashes. The worst came in 2020 when

as a pension fund CEO, I had to answer

calls from worried clients when COVID

caused the market to fall by more than

30%. But now that I look back at the

past two decades, major crashes have

actually been very rare. If you look at

even longer term historical data, on

average the stock market goes up around

three out of every four years. And when

the market does fall, the average drop

is fairly small. And after every one of

those drops, eventually the market

recovers. So patient investors usually

make a lot of money. It is just that the

big crashes when they happen, they are

super scary. they leave a big

psychological impact. So, don't make my

mistake. Don't let the fear of risk stop

you from investing. The real risk is

leaving money to sit in your bank

account. Next, here are a few of the

most expensive mistakes that I've seen

my clients and students make. The first

one is buying individual stocks. The

other day, I ran a beginner investment

workshop where I talked about how

profitable stock investing has been. One

of the attendees actually stood up and

said, "That's nonsense. I've been

investing in stocks for 10 years, but I

haven't made any money. I could guess

immediately what the problem was.

Because over the past 10 years, global

stock markets have been tremendously

profitable. But if you pick just three

to five stocks to buy in your portfolio,

there's a big chance that you will lose

money. If you look at decades of data,

you discover that the average stock in

the market actually loses investors

money. Many big famous stocks like Enron

or Lehman Brothers or Bed Bath and

Beyond or Kodak have gone to zero. But

that's not the only bad thing that can

happen. As many as 40% of all stocks

experience catastrophic losses of 70% or

more and they never recover from these

losses. The stock market has been

tremendously profitable not because most

stocks are winners. They are not. It's

been tremendously profitable because a

few top stocks are so extremely

successful that they pull up the average

for the rest of the market. So, if you

try to make money by picking individual

stocks, chances are you will fail. Now,

you might think, "That's dumb, Tom. I'm

not going to pick stocks at random. I'm

not going to pick losing stocks. I will

only pick the winners." Well, this leads

us to the next extremely common mistake,

which is chasing hot stocks. Today, the

five hottest stocks out there are

probably Nvidia, Microsoft, Apple,

Amazon, and Meta. They are the big five

in the S&P 500. People ask me constantly

about these stocks. And listen, I'm not

telling you that these are bad

investments. With the AI revolution

happening, there are certainly good

reasons why many investors are excited

about these companies. But if we look at

history, we notice a pattern. In 1990,

the five biggest stocks in the S&P 500

were Exxon Mobile, IBM, Walmart, Bristol

Myers, Squib, and Merc. Out of these,

only Walmart outperformed the S&P 500

over the next 35 years. In 2000, the

five biggest stocks were again Exxon

Mobile, General Electric, Cisco, Fizer,

and Walmart. And once more, only Walmart

outperformed the S&P 500 over the next

25 years. In 2010, the five biggest were

Exxon, Apple, Microsoft, Berkshire,

Haway, and Walmart. Of these, Apple and

Microsoft outperformed until today,

while Walmart or less matched the

performance of the S&P 500. The thing

is, the biggest and hottest stocks of

today are often not the best performers

going forward. That's because any stock

which is hot today is likely already

expensive. You cannot jump in and buy it

at a cheap price. To be really really

successful picking individual stocks,

you would have to guess the next Nvidia,

the next Microsoft, the next Google

before everybody else. And that is

extremely difficult. That is why for

amateur investors, chasing hot stocks is

usually a mistake. You are usually

better off buying an index fund or ETF,

which will put your money into hundreds

of different stocks in different regions

and industries. This not only gets

better results, it's also a lot less

work. But when people here in Europe

decide to invest in ETFs or index funds,

they often make the next mistake, which

is following American investment advice.

When I moved home to Europe after 8

years in America, I felt like I'd landed

on a different planet. There were

different investments, different

regulations, different tax rules for

everything. And this is something that

stops so many beginning investors here

in Europe. You Google index funds or

ETFs. You find a great blog or book or

video from some American educator. and

you try to follow the instructions, but

you hit a wall. Because of EU

regulations, you can't buy American

index funds and ETFs in most European

countries. Most American brokerages

won't accept European clients, and

American tax advice about their 401ks

and IRA and long-term capital gains

doesn't really apply to us here in

Europe. Instead, as a European, you

should use a local brokerage or

investment app to make your investments.

You should follow the tax rules of your

local country and you should invest in

ETFs and index funds which follow

European regulations. By the way, the

best place to find these ETFs is a

website called just ETF.com. It's a

great database listing over 3,000

different ETFs that are available to us

here in Europe. Which leads me to the

next common mistake, picking the wrong

ETF. There are actually two ways that

people often mess this up. The first way

is strategic. People often ask me which

S&P 500 ETF should I buy? As if the only

way to invest is to buy the 500 biggest

American companies. Now, to be clear,

the S&P 500 has been a great investment

for decades. And it might still be a

great investment going forward, but it's

not the only possible choice. You should

ask yourself questions like, do I want

to invest 100% of my money in stocks or

should I also look at lower risk

investments like bonds? Should I invest

only in the American stock market or

should I also look at Europe or Asia or

emerging markets? Before you jump

straight to choosing a specific ETF,

think about your strategy. Okay? And

then there's the second type of ETF

mistake, which is technical. For

example, this could be buying what is

called a distributing ETF if you are a

long-term investor in Portugal. Because

with these distributing ETFs, you will

be paying dividend taxes on your ETF

income every year, which you could have

avoided by buying what's called an

accumulating ETF. Another mistake could

be buying a Luxembourg-based physically

replicated global stock ETF because this

means that you would pay extra tax on

dividends from American stocks compared

to an ETF that is based in Ireland. Now,

that might sound complicated, but here's

the thing. For every major market index

like the S&P 500 or the Footsie all

world, there are many types of ETFs

which track this index. You have

accumulating and distributing ETFs. You

have physically and synthetically

replicated ETFs. You've got ETFs based

in Ireland and ETFs based in Luxembourg.

Each of these has different tax

consequences. Each of them will get you

different results depending on the

country where you live. Plus, in some

countries like Spain, you might not want

to buy an ETF at all. You could get a

better tax result by investing in index

mutual funds instead. So, the technical

mistake is not optimizing your fund

choice for your personal situation and

your local tax rules. I've actually put

together a training on how to choose the

best ETFs or index funds for investors

here in Europe. Just click the first

link in the description of this video to

watch it. But now, let's address another

common beginner mistake, which is

chasing dividends. And the idea is

appealing. You invest in a few great

companies, they earn a profit, and they

pay you a dividend, which lands in your

bank account. You're getting cash from

your investments. What's not to love?

Well, as it turns out, there's plenty

not to love about dividend investing.

First of all, when stocks pay out

dividends, usually there's some kind of

tax involved, which takes away part of

your money and reduces the capital that

you have available for future growth.

This is one of the reasons why many of

the biggest companies in the world pay

less and less and less in dividends

these days. Instead, they use other

mechanisms like share buybacks to

compensate investors. And second, many

dividend paying stocks which pay the

highest dividends actually give you poor

overall results. They are missing the

second half of the profit equation,

which is growth. One of the most

controversial truths in investing is

that dividends are simply not that

important. Chasing dividend paying

stocks does not improve your expected

returns. Now, here's another mistake

that I once made myself. Ignoring taxes.

When I moved back to my home country,

Latmia, after working in America, I

didn't investigate Latian tax rules

closely enough. I thought I was paying

what I was supposed to. But one day, I

got a letter from the government which

said, "You owe us money." That was

pretty stressful and it cost me a good

amount of cash. Don't make the same

mistake. As soon as you make your first

investment, you are subject to

investment taxes. Research what taxes

you need to pay in your country before

you get started. And if you're an expat

or digital nomad, check in which country

you need to pay these taxes. Messing

this up is an easy way to get into not

just financial, but also legal trouble.

In a moment, I'll share a resource that

makes this easy. But first, here's

another big mistake. Timing the market.

Look at this chart of the S&P 500 over

the past 25 years. Wouldn't it have been

smart to buy at these times when stocks

were cheaper and sell at these times

when the market was at all-time highs?

People ask me this all the time and I

told them, "Brilliant idea. I wish I had

thought of it first." Okay, that's not

what I told them because in reality,

market peaks and bottoms are only

obvious looking backwards. At any given

point in time, there is no way to

predict whether the market is about to

fall or whether it will keep climbing.

If you wait for the next big crash to

buy, sometimes you may have to wait for

many, many years. And when that crash

comes, that is usually a scary time.

There are lots of new headlines

predicting basically the end of the

world. It's very hard to convince

yourself to buy stocks at a time like

January 2009, the depths of the

financial crisis or March 2020 when

COVID hit. There's been a huge amount of

research done on this and the conclusion

is pretty much 100%. If you try to do

market timing, chances are you will

spend a lot of time and energy, you will

suffer a lot of stress, and you will

almost certainly fail. There's a reason

Warren Buffett said the only value of

stock forecasters is to make fortune

tellers look good. There's a reason

Nobel Prize winner Robert C. Merin

called market timing a fool's errand. It

simply doesn't work. The best approach

for ETF and index investors is to start

investing today and to keep investing on

a regular basis no matter what happens

in the market. Which brings me to

another important point. Sometimes new

investors don't want to deal with the

stress of managing their own

investments. So they go to their local

bank and say take care of investing for

me. And this leads to a major mistake

which is paying high fees for investment

advice that you don't understand. A few

years ago a friend came to me and said

my banker put together this portfolio

for me. What do you think? And look, I

can't give people investment advice. I

don't have a license for that. But I did

want to kind of laugh and cry at the

same time because this portfolio had

something like 20 different ETFs and

investment funds. Some of them actively

managed with high fees. Every time that

my friend would invest some money, he

would pay a bunch of fees to buy each of

these funds. Plus, the bank was charging

him 1% per year just to manage his

money. It was basically highway robbery.

And unfortunately, it's very, very

common. The typical investments offered

by your local bank here in Europe are

expensive and will get you poor results.

But here's an even bigger danger. When

you follow the advice of your banker and

buy investments that you don't

understand, that doesn't actually take

away your stress. It increases your

stress because you're risking your life

savings on a strategy in which you have

no confidence. Like my student Anna

said, how can you trust your financial

future to something you don't fully

understand? Now, the good news is

investing is not such a hard skill to

learn. You just need to answer a few

questions like which ETF or index fund

is best for you, what brokerage can you

trust, and how do you handle taxes?

Well, the best way to answer these

questions is to watch an in-depth video

on this topic that I put in the

comments.