Stay the Course
Markets go up and down. Corrections (drops of 10% or more) happen regularly. Bear markets (drops of 20% or more) happen every few years. The biggest mistake many investors make is selling when prices fall out of fear, then buying back in when prices are high. A systematic approach—a plan you stick to—helps you avoid emotional decisions.
Dollar-Cost Averaging
Investing a fixed amount regularly—for example, $500 every month—is called dollar-cost averaging. You buy more shares when prices are low and fewer when they're high. You don't need to time the market. Over time, this can smooth out volatility and reduce the impact of buying at a peak.
Many investors do this automatically: 401(k) contributions come out of each paycheck, and IRA or brokerage auto-invest is set to monthly. Set it up once, then let it run.
Avoid These Mistakes
1. Panic Selling
Corrections and bear markets are normal. History shows that staying invested has rewarded long-term investors. Those who sold in March 2020 and sat in cash missed one of the fastest recoveries. If your plan is sound, stick to it.
2. Chasing Performance
Last year's top fund or stock often lags next year. Jumping from one hot pick to another usually leads to buying high and selling low. Stick to a diversified, low-cost plan.
3. Over-Trading
Every sale in a taxable account can trigger capital gains tax. Frequent buying and selling also increases the chance of emotional mistakes. Buy and hold. Rebalance once a year if needed.
4. Ignoring Fees
A 1% annual fee might seem small, but over 30 years it can cost you tens of thousands of dollars. Choose low-cost index funds (expense ratios under 0.2%). VTI, VOO, VXUS, and BND all have expense ratios under 0.1%.
5. Not Starting
The best time to start investing was years ago. The second best time is now. Even small amounts, invested regularly, can grow significantly over decades thanks to compounding.
Pro tip
Set up automatic contributions to your 401(k) and IRA. Out of sight, out of mind. You'll build wealth without thinking about it—and you'll be less tempted to stop contributing when markets dip.
What You've Learned
You've covered the essentials: how the market works, choosing a broker, tax-advantaged accounts (IRA, 401k), bonds, stocks, ETFs, portfolio building, and taxes. The next step is to take the exam to reinforce what you've learned—then open an account and start investing. Even a small start counts.