The #1 Mistake New Investors Make

The #1 Mistake New Investors Make by Jerry Fetta

Investing is one of my favorite topics because it is one of my favorite things to do. There is literally no better feeling in the world than building up enough capital and then putting it into a real asset and seeing that asset pay me. However, while investing can be the greatest feeling in the world that does not mean it comes without risks.

I’m not talking about stock market risks and volatility like most may assume. I’m talking about a different type of risk. Risks that have to do with an asset itself are actually fairly limited and fairly easy to contain. No, the risk I am talking about is what I call Behavioral Risk. It’s a risk that is actually inherent to the investor him-or-her-self.

You see in any investment there are usually 3 or more parties.

The first party is the asset. It is its own party as it has its own moving pieces and particles.

The second party is the managing party. They are somehow connected with the growth and management of the asset.

The third party is the investor. This is the person that is going to put money into the asset.

An investor normally goes into a deal thinking the asset party and the management party are the parties to be worried about from a risk avoidance standpoint and this assumption couldn’t be further from the truth.


Because an asset is inanimate and amoral. Like money it just performs based on math. So if I know math and I know the asset itself I have nothing to worry about.

The managing party has a job and that job is to grow your money. Now sure there can be dishonest or just flat out poor managing parties but this is fairly easy to spot and handle. But for the most part they just want to do their job the way do they with every other investor they’ve worked with and they aren’t looking to rock the boat.

The investor is actually the party that contains the most risk. That’s right.

Let’s talk about why this is the case. I’m going to relate this to driving. When I’m on the road driving who is the most dangerous person on the road with me? It’s the person who doesn’t know what they are doing. The person who is uncertain and inexperienced. This is the investor in many cases.

Many investors overlook that they themselves contain the most amount of risk out of any party involved in a deal. This may sound unfair or even judgmental, but that doesn’t make it not true.

What I’ve observed and am about to share here is what I consider to be the #1 mistake new investors make and it is the sole thing that makes them the riskiest part of their deal. So what is it?

Not understanding the purpose of the investment, what it produces, or how to measure its production.

Simple as that. Most investors don’t understand what end an investment is supposed to accomplish. They don’t have certainty on what it’s producing or them and if that thing being produced is the right thing. And they don’t know how to measure that thing being produced to determine if the investment is meeting their objectives and purposes.

I want to share a few examples of this.

Investor A decides he wants to do a deal. He’s saved up $40–$50,000 and he gets the bright idea to invest it. He’s seen plenty of YouTube and Facebook ads about investing, heard the titles of a few good books on investing and heck he may have even read a few pages of some of those books. He knows he’s not an expert, but he also doesn’t want to work forever and he knows wealthy people get wealthy by investing.

He begins looking for actual investments and realizes it’s much harder to find good ones and that he doesn’t really know what criteria to look for. He finally finds some investment influencer’s video or article that contains some investment criteria that seem to make sense and so he begins to match investments up using these criteria.

He finds a deal that is paying 10% and it looks like it matches the criteria and he thinks he’s going to do it. He’s so excited because he hates his job, doesn’t really want to work anymore, and can’t wait to be financially free and this deal is going to help him get there. But then he realizes 10% of $40,000 is $4,000/yr which is only $333/mo. That isn’t that much money. At that rate if he invests $40,000 and makes 10% it will take him 10 years to earn enough interest to recoup his original $40,000.

Investor A doesn’t want to wait 10 years. He wants to be financially free now so he can quit that job he hates. So he begins looking for greater returns. If he can earn more, then he doesn’t have to keep working. He looks for 15% returns. Fewer deals, but he finds one. But at 15% he’s still only making $500/mo. At 20% he’s only making $666/mo. He realizes if he wants to earn enough income from this investment he’s going to need to double his money and quickly too. So he abandons the criteria he adopted and begins to instead look for ways to double his money. We won’t speculate on the story of Investor A beyond this point, but we can all guess what probably happens.

This example illustrates how Investor A was his own greatest risk factor. He didn’t understand the purpose of investing. The mistake he made (which is the primary mistake I see new investors make) is he violated something called The Triangle of Wealth.

Picture a triangle and at the top point of the triangle we have “earn”, the bottom left point we have “save”, and the bottom right point we have “invest”.

Triangle of Wealth

Wealth is built ONLY by earning income, then saving the income, and then investing the income into something else that produces income so that the triangle can repeat itself exponentially until a person is wealthy.

Investor A didn’t understand the purpose of investing is to incrementally achieve passive income that exceeds his savings, expenses, and taxes so he can be financially free forever. What he did, and what many investors do, is they attempt to make the investing point of the triangle take over the job of the earn point of the triangle. The entire point of this triangle is that a person earns, saves, and invests, and then continues to earn using the same successful source that got them to where they are in the first place, supplemented by their new investment income, and to now save the same money they’d been saving before plus 100% of their new investment income so that they can reinvest sooner and build wealth faster.

So if a person out of laziness or disdain for working tries to make their investment replace all of their income now they are attempting to make investments fulfill a purpose that they aren’t meant to fulfill. An investment isn’t meant to make someone rich instantly. It’s meant to produce passive income so they can have their money multiplying for them in the background while they earn and save more and over time and with consistency they’ll achieve wealth.

With Investor A we saw him subtly but definitely jump from investing (buying real assets that produce income) to speculating (buying anything low with the hopes to sell it high and make quick money) because he didn’t understand the purpose of investing.

This then caused him to measure his investment with the wrong statistic. Someone in his position should be measuring with statistics like “passive income produced”, “percentage of savings, expenses, & taxes covered by passive income”, or even “number of uninterrupted months passive income”. Instead he is measuring it with “price increase” or “rate of return”.

He also will fall into the trap of not realizing what his investments produce for him because of this. You see, I like passive income producing investments because it actually does produce something. Every month I get a real check that I deposit into my Sacred Accounts. I can measure it and it’s tangible. But if I start speculating by buying low so I can sell high, I don’t actually get anything. Let’s say I buy an asset really cheap and then it skyrockets in price. I may feel like I’ve done well and “made a lot of money” but contrary to popular belief I haven’t made a red cent yet. Because with this type of deal I don’t actually secure a profit until I SELL for more than I put into the investment in the first place. Which means all this time my investment has produced nothing for me because I haven’t realized any sort of income or gain.

So let’s bring this back around. The #1 mistake that new investors make is not understanding the purpose of investing.

This mistake causes them to chase the highest returns possible, have no relevant way to measure the performance of their investments by statistic, and ultimately to get into investments that don’t actually produce realized returns.

As an investor and fund manager myself, I don’t let these types of investors invest with me. It’s like going hunting with someone who has never shot a gun and grew up watching too many Steven Seagal movies. They’re going to injure themselves or someone else with their behavior and completely without intention to do so.

How do we fix or prevent this?

#1 Understand the Triangle of Wealth.

#2 Don’t attempt to make the Invest corner of the triangle takeover the job of the Earn corner of the triangle.

#3 Don’t invest if something doesn’t meet your purpose, doesn’t produce something viable for you, and isn’t measurable by statistic easily.

Investing can be a beautiful thing when done the right way, at the right time, in the right order, and for the right reasons. But outside of those boundaries, investing is just a really sophisticated way to lose lots of money and if/when that happens an investor has nobody to blame but themselves for not handling the fact that they were probably their own biggest risk factor.

If you’re reading this and you’d like help become an intelligent and successful investor I want to invite you to reach out to me. I’m 28 and have almost $2 million in investment assets myself and have never lost money yet on a deal. This isn’t to brag or to impress you but to point out my own personal success with the principles I’ve shared in this article.

My last word of personal advice is don’t try and find shortcuts with this investing thing. A successful investor is often the last person standing at the end of the race and that’s the true measure of success. History is riddled with people who invested in get rich quick deals that worked sometimes for several years before they finally crashed and lost all of their money. We aren’t looking for a quick bump. We are looking for a long term, sustainable way to build wealth that isn’t going to disappear.

To learn more about how to do this, I want to offer you a copy of my new book The Blueprint to Financial Freedom that will give you an in depth look at how to do this successfully. Click here to grab a copy.

I hope you enjoyed this article and please like, share, and follow!

To Purpose, Wealth & Freedom,

Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Fox, Chicago Weekly News, and other publications with dozens of features on popular podcasts and has earned endorsements and affiliations with names like Grant Cardone and Dave Ramsey. Jerry’s mission in life is to help create millions of financially educated and wealthy families navigating their economic futures with certainty and building more prosperous communities around them. Learn more at



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Jerry Fetta

Jerry Fetta

Jerry Fetta is the CEO and Founder of Wealth DynamX. Jerry’s mission in life is to help create millions of financially educated and wealthy families.