YW Blogcast 29 - Young investors and sharks

Winning the investment game is not for the faint of heart but it is critical to realize early on the necessity of embracing the idea that you MUST invest in some way in order to build wealth. Choose the stock market (probably your worst option), start a small business, or invest in real estate (your best choice to succeed). When it comes to investing, the water is murky and current strong, and we don’t want you to get eaten by the first shark that swims your way.

To succeed, you’ve got to stay alive, financially speaking of course. Before you sink your first dollar into an investment, consider the following three factors that have derailed many a young investor career. Watch out for these sharks and maybe you’ll stay alive long enough to actually make some money.

1.Transaction costs – it’s easy to overlook these when perusing a mutual fund prospectus or calling your broker and telling him to “Sell, sell, sell!” or “Buy, buy, buy!” Pay attention to the transaction costs. If it’s too much, go somewhere else. If all your profit is being eaten up by the broker’s cut, find another broker.

2.Your broker is a crook – sad but true. The stories are out there…Enron…Bernie Madoff. Stay alert for crooks in the financial business because they will always be there. Don’t be the next poor sap to see his nest egg disappear in a poof of chicanery.

3.Your broker is incompetent – crooked dealing isn’t the only way to lose money. Your broker could be straight as an arrow but simply not cut out for the job. Maybe he’s in the wrong field. Maybe he doesn’t have the IQ for the gig. The lesson is don’t trust your future to an obvious incompetent.

While we can’t give you an entire financial education in one blog, keep your eyes open for these three pitfalls and your chances for success just increased astronomically.