3 Biggest Investing Mistakes to Avoid According to Warren Buffett

The untouchable billionaire investor Warren Buffett has an incredible message for the average investor: “Don’t beat yourself.”

“The nice thing about investing in stocks is that, over time, equities are going to do well,” said Buffett to USA Today. “American business is going to do well. America is going to do well. So you have the tide with you.”

Wealth building through the stock market is certainly the way to go, even though it is definitely a bumpy ride every once in a while, says the 83-year-old Buffett.

If you are going to truly profit from the stock market and use it to build wealth over time, according to Buffett, the individual investor must avoid making mistakes that can be costly and shrink the balance of their portfolio. Think of it like a football team… If the team wants to improve their chances of winning, they have to stop fumbling the ball, throwing interceptions and avoid costly penalties.

“Don’t beat yourself,” says the Oracle of Omaha. “Beating yourself is half the problem.”

Buffett was asked by USA Today to tell them about the three biggest mistakes that investors often make. Let’s take a look at Buffett’s “Top 3 Mistakes to Avoid.”:

1. Attempting to copy high-frequency traders. Buffett believes that buying and holding for the long-term is a much better move than purchasing stock and looking to flip it by short-term trading.

“If they are trading actively, they are making a big mistake,” says Buffett.

2. Attempting to time the market. “People that think they can predict the short-term movement of the stock market – or listen to other people who talk about (timing the market) – they are making a big mistake,” Buffett said.

3. Paying too many high expenses and fees. There is no reason at all to pay a large management fee in order to invest in a mutual fund when you can purchase super low-cost index funds that also mimic the large indexes like the Standard & Poor’s 500 stock index that are available, says Buffett.

“If they are incurring large expenses in connection with their investing,” Buffett says, “they are making a big mistake.”

Buffett’s most famous for buying stocks at low prices, and he also buys solid businesses that make good money today and in the future. He’s also known to hang onto his investments for many, many years.

There’s no question that Buffett strategy works. It is not an accident that he became the richest person in America by following his investment game plan. (At the time of this writing, Buffett is worth $58.5 billion and is the second richest person behind Bill Gates of Microsoft fame, who is currently worth $72 billion according to Forbes.)

“Doing reasonably well investing in stocks is very, very easy,” says Buffett.

Here’s how the average person should play the game of investing:

“Buy an index fund, preferably over time, so you end up owning good businesses at a reasonable average price,” Buffett says. “And that is all you have to do.”

Is it really that simple? Buffett believes that it is.

“You don’t need to look at the prices of the stocks you own from week to week, or month-to-month, or even year-to-year,” Buffett says. “If you own a cross-section of American businesses and you don’t get excited (and buy) just at the very top, and if you buy over time, you are going to do well.”