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Six ways to avoid expensive investment mistakes

(MoneyWatch) As noted in my new book “Think, Act, and Invest Like Warren Buffett,” Warren Buffett discussed the following seeming anomaly in his 2004 letter to Berkshire Hathaway’s shareholders: “Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.”

My own experiences over the past 18 years confirm Buffett’s views. I have seen many family fortunes lost because of the failure to follow some simple, basic rules of prudent investing. And I’ve also seen far too many retirement plans fail and hard-earned savings lost because of the same type of mistakes. In his letter to shareholders, Buffett went on to list three primary causes for the unfortunate outcomes: high costs, portfolio decisions made on tips and fads, and efforts to time the market.

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