In our first book in more than five years, The Motley Fool Million Dollar Portfolio: How to Build and Grow a Panic-Proof Investment Portfolio, we present the investing playbook we believe will help you amass that million-dollar portfolio. The book (on sale today) presents the strategies -- value, growth, small, large, domestic, international -- we preach and practice every day at The Motley Fool. But our new book goes one step further: It shows you how to put all those strategies together.
Below, you'll find an exclusive excerpt from our newly released book.
Getting started
Americans make three primary investment mistakes. A startlingly large portion of our populace stands on the market's sidelines forever, missing out on the greatest builder of wealth available to the average (law-abiding) citizen. Many Americans just never save -- or invest -- anything. This is the greatest mistake of all. No matter your age, the best time to start investing is now.
The second biggest investment mistake is waiting too long to start. It turns out that financial independence can't be achieved as quickly as everything else in our lives: 90 seconds in the microwave oven, one-click buying on a website, or speed dial on our mobile phone.
The third biggest investment mistake is the subject of this book. People with this affliction might have money put away and may have purchased some mutual funds and even a few stocks. They've recognized the value of getting started, allowing the returns to compound over time. They make us proud. But they often have one tragic flaw: They are wildly unsuccessful pickers of stocks.
Picking good stocks
Investors often pick the wrong stocks and build the wrong kind of portfolio. They lack any coherent strategy. When the stocks they buy inevitably drop -- at least temporarily -- these folks cash out their shares and take a loss, running from the market altogether. Or they invest in bad stocks and stay with them for too long, "just hoping to get back to even." These strategies combine the damaging elements of desperation, blind optimism, and greed.
But even the most comically inept investor is in a far better situation than the non-investor or the latecomer. Because while the first two groups need to undergo a near-religious conversion before they see the light, a bad investor just needs a bit of strategy and guidance to accompany an existing practice and passion.
This stuff is eminently teachable. It's what this book is for. Think about how hard it is for many of us to get past those first two mistakes. The odds are stacked against an early start at successful investing. Most Americans begin their professional careers saddled with credit card debt and student loans while trying to pay for all that life entails, often on a relatively small starting wage. There's not a lot of cash floating around. And even in the unlikely event that their couch cushions were overflowing with $20 bills, most people wouldn't know how to properly put the found money to the best possible use. Our high schools and universities have failed miserably to educate their students about how or why to invest. For the most part, no one has stressed the importance of saving and the value of investing, so they wander relatively blindly (or at least shortsightedly).
