9 Costly Investing Mistakes I Made

Investing in the stock market can be a lucrative way to grow your wealth.

But, every investment comes with risk.

It’s important to approach investing with caution, so you don’t do what I did… and lose a ton of money.

Keep reading to ensure you avoid these common beginner mistakes.

Not Having A Plan

Before you start investing:

• Set clear investment goals

• Determine your risk tolerance

• Develop an investment strategy that aligns with your goals and risk tolerance.

It doesn’t have to be something that’s detailed.

But, it’s important to consider certain aspects before putting your money to work.

Your investment plan should include:

• A goal. Why are you investing?

• Time frame. How long are you investing for?

• Amount. How much are you investing each month?

• Ideal return. This will be impossible to predict in the short term, but you can use historical figures to make an estimate.

You’ll be able to make better investment decisions and avoid trades that could lead to big losses.

We don’t want that now, do we?

Not Diversifying

Another common mistake is putting all your money into one, or a few stocks.

Rather than diversifying your investments across different stocks and sectors.

When you’re investing in stocks, it’s important to diversify to minimise risk.

Spread your investments across different…

• Stocks

• Sectors

• Asset classes

…so that if one stock or sector performs poorly, you won’t lose all your money.

Diversification isn’t necessary in ETFs, as they’re already diversified.

But, it’s always smart to have a range of investments in different asset classes, like:

• Stocks

• ETFs

• REITs

Not Doing Your Homework

It’s essential to do your research and check:

• The company’s financial health

• Management

• Competitive landscape

Some investors make the mistake of investing without doing their own due diligence.

Warren Buffett says that he would only invest in a company’s stock if he would buy the whole company.

The logic is perfect, so next time you go to invest, ask yourself…

Would you buy the whole company if you could?

Following The Crowd

Investing based on the latest trends or the advice of friends and family can be a disaster.

Don’t let the FOMO affect you.

It’s essential to stick to your investment strategy and avoid impulsive trades.

Don’t be swayed by the latest fad or the advice of others, unless it aligns with your strategy.

I was guilty of this on many occasions when I started investing.

It was all about not wanting to miss the boat on the “next big thing”.

Only to learn later that everyone was in the same boat, and nobody knew what they were doing.

The key here… do your own research.

Over Trading

Over trading can lead to:

• High transaction costs

• Lower returns over time

• A lack of discipline

Investing is so good because you’re not investing much time into it, whilst letting the market do the work for you.

You can even set up automatic deposits so you’re investing regularly each month with zero effort.

Focus on a long-term strategy that involves regular deposits and a well-diversified portfolio.

By avoiding impulsive trades, you’ll increase your chances of achieving long-term success.

Over trading comes from a lack of understanding on what you’ve invested in.

Again, knowledge of your investments is key, so there is never a temptation to sell.

Trying to Time The Market

Another mistake that investors often make is trying to predict when stocks will rise or fall.

This approach can be tempting, as it can lead to big gains in a short period.

But, trying to time the market is risky. It’s impossible to consistently predict movements.

You might do well on a few occasions, but the luck of the draw will catch up on you.

Another quote that I love…

“Time in the market, beats timing the market.”

Being Impatient

Investing is a long-term game, and it’s important to be patient and stay committed.

Don’t get discouraged if you don’t see immediate returns. Or, if the market experiences a downturn.

The stock market is cyclical and will experience ups and downs over time.

Try your best to forget about your investments, and avoid constantly looking at them.

A long term outlook is essential to success.

You won’t get rich overnight and checking your portfolio every hour won’t change anything.

Stick to your plan, and acknowledge that this is a long term process.

Ignoring Fees

Investing in the stock market comes with fees and expenses, like:

• Transaction costs

• Account maintenance fees

• Management fees

These fees can eat into your returns over time, so it’s important to factor them into your strategy.

When choosing an investment platform, research their fees.

Some platforms are sneaky when it comes to a lack of transparency on fees. This can eat into your returns when the fees compound.

Panic Selling

In times of volatility, some investors may be tempted to sell in a panic to avoid further losses.

But, panic selling is a mistake that can lead to significant losses in the long run.

Where there is a top, there is also a bottom.

The stock market is cyclical, and will experience ups and downs over time.

Mindset is key here.

A long term mindset is essential for your success.

When I see a drop in the market, I don’t panic. I see an opportunity to buy my favourite investments at a lower price.

Why? Long term mindset.

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