1. Forgetting to invest your money

This might seem like an obvious mistake to avoid, but forgetting to invest your money happens more often than you’d think. Whether you're investing on your own, in an IRA or through your employer’s retirement plan, you must remember to actually choose what investments you want your money to go into.

A retirement account is similar to a bank account, but instead of solely holding cash it also holds investments, such as stocks and bonds. Contributing cash from your paycheck is step one. Step two is investing that money into something like a target date fund. If you don't do this crucial step, all of the money you contribute will just be sitting in cash. With most retirement accounts you can select where you want your money invested and then it will automatically invest all future contributions making the whole process automatic.

Take this as your reminder to double-check that you are actually investing the money you are adding to your retirement accounts.

2. Investing in only a handful of companies

Don’t put all your eggs in one basket. No matter how profitable they may seem, investing in only a few companies can be a risky mistake. If a company is currently doing well, it doesn’t guarantee that its upwards trajectory will continue in the future. For example, do you remember BlockBuster, Borders bookstore, or Circuit City? They were all once very profitable companies but have all since closed their doors.

Try a less risky path by spreading your money across multiple investments. Investing in an index fund, for example, works by spreading your money across hundreds or sometimes thousands of different companies. By investing in an index fund you don’t have to worry about what happens if one of the companies in the index goes out of business or just has a bad year. The hundreds of other companies will help to balance out those losses and smooth out the rollercoaster that is the stock market.

3. Avoid constantly watching your investments

It’s natural to want to keep an eye on your retirement savings. However, making logging in to your retirement account a daily habit can lead you to make emotional decisions that could cause more harm than good.

You might think that selling and buying your investments regularly will stop your portfolio from suffering any losses but that’s not the case. You have to think of the big picture when it comes to investing. The stock market is a volatile place and prices are constantly going up and down. Numerous studies have found that investors who take a “set it and forget it” approach to investing have much better outcomes than those who try and predict the market.

It's fine to check your retirement account a few times a year but don't make it a daily or weekly habit.

4. Ignoring your retirement plan match

If you're fortunate enough to work for a company that provides a retirement plan, like a 401(k), chances are they might also offer a matching contribution. A 401(k) matching contribution, sometimes just referred to as a “match”, is when a company matches your retirement contributions with free money simply because you are participating in the company’s retirement plan.

In most cases, you’ll have to contribute a certain amount of money in order to receive this match. For example, you will receive one dollar from your company for every dollar you put into your 401(k) up to 5% of your total salary. Or your company might give you 50 cents for every dollar you contribute up to the annual contribution limit.

No matter what type of matching program your employer offers, it’s always a great idea to take advantage of it. So check in with your HR department and see how much you need to contribute in order to receive all the free money your company is handing out!
 

5. Waiting to invest

Time is your best friend when it comes to investing. The longer you can give yourself to let your money sit and grow, the better off you'll be in retirement. A popular misconception is that investing is only for those who are rich or well off. However, that simply isn’t true. You can start small by investing a few dollars from every paycheck and then adjust that amount when your circumstances change. The important thing is to build up that habit and start investing early.

The best time to start investing was yesterday but the next best time is today.

Investing is for everyone so start putting your money to work now. Your future self will thank you!