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Five Mistakes Young Adults Must Avoid When Investing

Expert Panel
POST WRITTEN BY
Forbes Finance Council
This article is more than 6 years old.

While retirement may seem a long ways off, the younger investors get into the markets, the better positioned they'll be when it comes time to step away from work. Keeping in mind that everyone's circumstances and risk tolerances are different, there are a number of big mistakes that young adults should avoid, including ignoring investing entirely or jumping in without a goal or plan.

To help young investors stay away from damaging errors, members of the Forbes Finance Council advise the following:

All photos courtesy of Forbes Councils members.

1. Don't put off retirement investing.

The beauty of investing for retirement when you're young is that your wealth has decades to grow and compound. A few hundred dollars stashed away every month can become a fortune by the time you reach retirement age. However, most people put this off because it's so far away, and they'd rather spend elsewhere. You can avoid scrambling later by putting a little into an IRA or 401(k) each month. - Elle KaplanLexION Capital 

2. Don't be afraid of debt. 

I don't recommend blowing through expenses on credit cards, but as a young adult, it's the perfect time to take other risks. Taking out $30,000 in loans to start a business gets riskier the older you get, so do it now. Start to think differently about debt: make a monthly car payment instead of paying cash and put that $15,000 into the market. Debt can be smart if leveraged correctly. Don't be afraid of it. - Rachel CarpenterIntrinio 

3. Take advantage of employer-matched 401(k) programs. 

If your employer matches a certain percentage of your contribution to a 401(k) plan, maximize the matching contribution. This is essentially free money, and due to compounding interest, early 401(k) contributions are the most valuable in the long-term. Even if it reduces your disposable income to the point where your lifestyle is being cramped a bit, this strategy will pay off in the end. - Paul ParadisSezzle 

4. Get second opinions from experts. 

The biggest mistake I see is not getting a second opinion. I'm not talking about asking a friend's opinion. When I say this, I mean talking to an expert -- someone who can offer sage wisdom, giving a consistent, unemotional take on whatever you're about to invest in. Having that second set of eyes on investment choices can often prevent us from making major mistakes. - Justin GoodbreadHeritage Investors 

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

5. Be honest with yourself. 

There's an old saying: "Denial isn't just a river in Egypt." Successful investing requires setting a goal, assessing your progress, and having an honest conversation with yourself about saving versus spending (deferred gratification). Investment mistakes get made when investors deny the reality of their situations too long, then attempt to fix the situation by chasing unsuitable investments. - Erik ChristmanOxford Financial Partners