Buy Like Buffett: The Biggest Investment Mistakes Made by Young Investors

The best time to start investing is at an early age. That is because you have fewer financial obligations and entanglements that will keep you from investing. Too many individuals wait until they are older in age to start investing. By then they have let precious years slip by and are behind the eight ball.

 Let's take a look at some of the biggest mistakes that young investors make and why you should avoid them.

Sitting on the sidelines

The last few years have had a negative effect on many young investors. Young investors saw the stock market drop as reason to worry and have chosen to avoid investing. This is a major mistake since investing is the only way that most investors will ever be able to retire. Pension plans are no longer the norm since employers have moved to defined contribution plans. Young investors need to continue their contributions even during difficult market stretched.

Playing it too conservatively

Playing it too safe is one of the ways that an investor can hinder their own retirement efforts. The time to be aggressive when you are investing is at an early age. Young investors can afford to take maximum risk because they have such a long term time period to invest. The rates of return on government bonds, certificates of deposits, and municipal bonds are too low to be attractive to young investors. Playing it safe with T-bills is a smart strategy for an older investor but it will keep a younger investor from gaining the maximum return on investment.

Not investing enough money

The average person over the age of 50 does not even have $100,000 saved up for retirement. That is because most investors make the mistake of not investing enough money in their retirement account early on. Young investors should make a concerted effort to start stashing away money in the company retirement plan as soon as possible. Most companies will let new employees start investing in a retirement plan after 90 days of employment. Increase your retirement plan savings now so you won't be playing catch up later.

Overspending on unnecessary items

Younger investors often find themselves crunched for cash because their incomes do not match up to their spending levels. They spend too much money on movies, music, coffees and entertainment. It is never a good idea to devote too much of your income to expenses that do not generate any cash. Small expenses can wind up being big bills when added together each month.

Following these simple steps can have a young investor on the road to building a healthy nest egg in no time.

Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers. Mark publishes his own financial blog, BuylikeBuffett.com and has written the book Your Financial Playbook.