There's no getting around it. Before you invest any of your money, you must invest some of your time. The rule is simple: In order to become a successful Investor, you have to get your values and goals written down on paper and your finances organized. You absolutely must do a family financial inventory and balance sheet and determine precisely your current net worth. You also must get a good handle on what you earn and what you spend. This is not a guessing game or a time for estimates. Remember, until you know where you stand financially, you should not invest anything.

#2 - Buying an Investment You Don't Understand

Most of us will spend more time researching a new stereo or refrigerator than some stock or mutual fund. This is why so many investors fail so miserably. They literally don't know what they are doing.

#3 - Trying to Time The Market

There’s a widespread notion that the way to do well as an investor is to buy when the market is low and sell when it is high—what’s known as timing the market. The fact is trying to improve your performance by trying to anticipate market swings is a recipe for ulcer-producing anxiety, if not outright disaster.

#4 - Putting Off Saving for Retirement

Ninety-five percent of Americans who reach the age of 65 have an annual income of less than $25,000 a year. That means that fewer than 5% of us are in any position to lead a life of comfort when we reach our so-called golden years. In fact, the government tells us that only 2% of retirement-age Americans are truly wealthy, which is defined as being in a financial position to do more or less whatever they want when they want. The problem is not complicated. The longer you wait to get started, the more you need to save.

#5 - Speculating With Your Investment Money

A speculator is someone looking for a quick hit, a fast buck, a big payoff. And just like at a gambling casino, every once in a while someone does get lucky. But over the long haul, nothing will more effectively prevent you from ever becoming financially secure than speculating with your investment money.

#6 - Paying Too Much In Taxes

The biggest enemy of your financial future is taxes. When you are building and investment portfolio, it is absolutely imperative that you take into consideration your potential tax liability. Money grows in retirement accounts tax-deferred, which helps you to grow your nest egg faster.

#7 - Buying an Investment That is Illiquid

An illiquid investment is one that you cannot sell immediately. To me, immediately means in less than five business days. An example of the kind of illiquid investment I hate is a limited partnership. Limited partnerships generally are set up to pool investors’ money in order to purchase certain types of investments, typically real estate. The problem is that most limited partnerships are not salable—that is, not liquid—usually for as long as 10 to 15 years. What happens if an emergency arises and you’ve got to get your hands on your money early?

#8 - Having a 30-Year Mortgage

In my opinion, without question the biggest single scam perpetuated on the American buying public today is the 30-year mortgage. A typical 30-year mortgage at 8% inflates the real cost of a $250,000 home to more than $600,000. Most people dream of owning their own home. Most people also dream about being able to retire early so they can enjoy their lives and spend time with their loved ones. If you buy a home and pay it off early, you can accomplish both of these dreams. So pay off your mortgage sooner rather than later.

#9 - Giving Up

People often make a financial mistake, get bad advice, and then give up on their dream of financial security. Don’t let this happen to you.

By learning to avoid the common pitfalls investors make, you can minimize your risk and put yourself on the road to financial security. But remember—the biggest mistake is not to become and investor.

©1999 David Bach, Orinda, CA. All Rights Reserved.

This article is excerpted from David Bach’s book, Smart Women Finish Rich: 7 Steps to Achieving Financial Security and Funding Your Dreams (Broadway Books). David is one of the country’s leading financial advisors and educators. A senior vice president of a major New York brokerage firm, Bach is a partner of The Bach Group in Orinda, CA, which manages more than $600 million for individual investors. To learn more about how you can take control of your financial destiny, read Bach’s book, Smart Women Finish Rich, or call him toll free at 877-ASK-BACH.