USA Today asked Buffett to share the three biggest mistakes that investors make.
1. Trying to time the market. “People that think they can predict the short-term movement of the stock market — or listen to other people who talk about (timing the market) — they are making a big mistake,” says Buffett.
2. Trying to mimic high-frequency traders. Buying stock in a good business and hanging on for the long term, he says, is a better strategy than flipping stocks like a short-order cook flips pancakes.
“If they are trading actively, they are making a big mistake,” Buffett says.
3. Paying too much in fees and expenses. There’s no reason to pay an expensive management fee to invest in a mutual fund when super-low-cost index funds that mimic large indexes like the Standard & Poor’s 500-stock index are available, he says.
“If they are incurring large expenses in connection with their investing,” says Buffett, “they are making a big mistake.”
Here’s how he says investors should play the investing game:
“Buy an index fund, preferably over time, so you end up owing good businesses at a reasonable average price,” says Buffett. “And that is all you have to do.”
That’s it? It’s that simple? Buffett says yes.