Yahoo Finance Grant Cardone: 5 Biggest Investing Mistakes That Are Holding You Back
Investing your hard-earned dollars can bring plenty of benefits, like reducing your taxable income, hedging against inflation and improving your long-term financial outlook. However, many investors don’t capitalize on all of these advantages due to their mistakes and oversights.
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Grant Cardone is a successful businessman, real estate investor, internet celebrity and equity fund manager. He has a lot of financial experience and some advice for the average investor. If you’re investing your earnings or thinking about starting, it’s a good idea to consider the perspectives of big-time investors like Cardone. Here are the five biggest investing mistakes that he thinks may be holding you back, as he shared on Facebook.
Sitting on Cash and Never Investing
You may be familiar with the old financial adage: A penny saved is a penny earned. Savings can help you feel financially secure and prepare you for unexpected scenarios. While most agree that saving money is a good habit, Cardone has a response: “A penny saved is a penny and will never be more than a penny. This is your dad’s idea that kept him broke.”
Cardone explained that only doing things like working a full-time job and saving your income won’t bring wealth. “The only thing that will bring you true wealth is investing,” he said. People who save their money rather than invest, because they are terrified of losing it, won’t become wealthy.
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Speculating
With new cryptocurrencies and meme stocks sprouting up each day, it seems like everyone is becoming an investor. Jumping on the newest trend to try to make some quick cash might seem like a good idea, but it can be risky. And Cardone isn’t interested in taking risks.
Speculating is investing in property, stocks or other assets with the hope of increasing your value but with the possibility of lowering it. While it may be common practice for many investors to speculate, Cardone claims that he’s never lost money on an investment deal, because he doesn’t speculate.
To make sure he doesn’t lose money when investing in real estate, Cardone emphasizes the importance of cash flow. To determine your cash flow, you’ll subtract the property’s operating expenses and debt from your effective gross income. With a positive cash flow, properties can withstand the volatility of the housing market. Therefore, it’s essential to know your potential investment property has a positive cash flow rather than simply speculate.
Diversifying Your Investments
According to Cardone, diversifying your portfolio is a mistake. This advice runs counter to the often-echoed financial advice that diversification is a way to protect your investments from sudden market shifts and volatility.
Breaking from many well-known investment experts, Cardone goes all in on one thing when he invests: He only buys income-producing properties, such as real estate, that can make money through market appreciation and rent from tenants. While diversification can protect your investments, it rarely creates wealth.
According to Cardone, to become a great investor, you should take one area of the market and study it intensely. A common mistake is to study 50 different investments and try to be an expert.
Another common diversification mistake is allowing others to make your investment decisions for you and miss out on big profits. When people diversify their money and invest in ETFs and mutual funds, they make more money for investment management companies like Vanguard than themselves.
Not Investing Enough
Another common mistake that Cardone sees many investors making is not investing enough. Investing a small percentage of your savings may bring some profits but will never create wealth. When investing, Cardone emphasizes that it’s important to go big.
Cardone likened his investing strategy to why gamblers don’t win in Las Vegas. He said that the odds aren’t actually against the gambler. The gambler never wagers a large enough amount to take down the house. Cardone pointed out that this is why casinos ban big winners and keep betting limits.
By investing large amounts in real estate or other assets that you’ve researched, you put yourself in a position to create wealth. Cardone went as far as saying that he doesn’t consider amounts ranging from $2,000 to $10,000 to be actual investments. To really begin investing and building wealth, you’ll need at least $100,000.
Not Investing for the Long-Term Payoff
Investing over long periods takes patience. Today, most people look for instant gratification, whether it be next-day shipping from an online store or a fast download from a website. The thought of putting large amounts of money into an investment and waiting years for it to pay off may not sound appealing. However, not investing with a long-term mindset is another mistake that Cardone pointed out.
In a LinkedIn post, Cardone wrote, “Invest for the long term. If there is immediate gratification, it’s typically not an investment but an expense. The best investments take time to [bear] fruit.”
In this sense, betting on bitcoin to jump up 2,000% overnight may seem appealing, but it will likely turn out to be an expense. Putting your money toward a more stable investment, like real estate, and waiting is a much wiser strategy.
Don’t Make Investment Mistakes
Investing is a challenging endeavor that requires a lot of research, thought and strategy. To invest confidently and generate wealth over time, you’ll also need experience and good advice. Understanding the common mistakes that cause others to lose money can be to your advantage. By making the right moves, you’ll be on your way to creating wealth.
While some of Grant Cardone’s investment advice may be somewhat unconventional, he has logical arguments behind it and has successfully put it into practice. With the real estate investor and savvy businessman as your guide, you can determine if his techniques fit your investment strategy and start increasing the returns on your investments.
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