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Avoid these 9 Investing Mistakes


Investing is at best a risky proposition and sometimes even the best investment ideas don’t work out. However avoiding these 9 mistakes can help improve your investing outcomes.

Avoid these 9 Investing Mistakes

Inability to take a loss and move on 

It’s difficult for many investors to sell an investment at a loss. Often they prefer to wait until the investment at least gets back to a break-even level. I think its part of our competitive nature. Investing is not a competitive sport, leave that for our Olympians.  When reviewing your investments ask yourself “Would I buy this holding today?” If the answer is no, it’s time to sell and invest the proceeds elsewhere.

Not selling winners

I’ve seen many investors over the years refuse to sell highly appreciated holdings, all or in part. There is always the risk that you’ll sell and the price will keep going up. But sometimes it’s best to protect your gains and sell while you’re ahead or at least consider selling a portion of the holding and reinvesting the proceeds elsewhere. The latter can be part of your portfolio rebalancing process.

Investing without a plan

When you take a road trip in your car you generally have a map to help you to get to your destination. Investing is a means to an end, a road map to achieve your goals such as providing a college education for your children or funding your retirement.

Without a financial plan how will you know how much you need to accumulate to achieve your goals?  How much risk should you take?  What types of returns do you need to shoot for? Are on track toward your goals?  Essentially investing without a plan is much like hopping in the car without any idea where you are headed. 

Trying to time the market

It’s difficult to predict when the market will rise and fall. Even if the stock market is following a general trend, there will be up and down trading days. Trying to buy and sell based on those daily fluctuations is difficult. While there are professional traders who do this for a living, for most of us this is a losing proposition.

Worrying too much about taxes

Taxes can consume a significant portion of your investment gains for holdings in a taxable account. While nobody wants to pay more tax than needed, in my opinion paying taxes on a gain is almost always better than dealing with an investment loss.

Not paying attention to your investments

Your portfolio needs to be evaluated and monitored on a periodic basis.  You should reevaluate a stock when the company changes management, when the company is acquired by or merges with another company, when a strong competitor enters the market, or when several top executives sell large blocks of stock.

This applies to mutual funds as well. Manager changes, a dramatic increase or decrease in assets under management or a deviation from its stated style should all be red flags that cause you to evaluate whether it may be time to sell the fund.

Failure to rebalance your holdings  

This goes hand in hand with having a financial plan. Ideally you have an investment policy for your portfolio that defines the percentage allocations of your investments by type and style (stocks, bonds, cash, large stocks, international stocks, etc.).  A typical investment policy will set a target percentage with upper and lower percentage ranges for each style. It is important that you look at your overall portfolio in terms of these percentages at least annually.

Different investment styles will perform differently at various times.  This can cause your portfolio to be out of balance. The idea behind rebalancing is to control risk. If stocks rally and your equity allocation has grown to 75% vs. your target of 60% your portfolio is now taking more risk than you had planned. Should stocks reverse course, you could be exposed to over-sized losses.

Assuming recent events will continue into the future 

The first 15 plus years of this century have been tough on investors. The market tumbled during the 2000-2002 time frame and then again in 2008-2009. More recently the stock market dropped steeply and suddenly in the wake of the Bexit vote in the U.K. These events have instilled fear into many investors. It’s hard to blame them.

However this fear and the assumption that recent events will continue into the future might also be keeping you from investing in the fashion needed to achieve your financial goals. Taking the events of recent years into account is healthy, however letting these events paralyze you can be destructive to your financial future. This holds true for stock market drops as well as protracted bull markets.

Building a collection of investments instead of a well-crafted portfolio

Are you investing with a plan or do you simply own a collection of investments?  Great football teams like my beloved Green Bay Packers have a better chance of winning when everyone embraces and executes their role in the game plan for that week.  In my experience you will increase your chances for investment success when all of the holdings in your portfolio fulfill their role as well.

Nothing guarantees investment success.  Avoiding these 9 investing mistakes as well as others can help you increase your odds of being a successful investor.

Concerned about stock market volatility? Approaching retirement and want another opinion on where you stand? Not sure if your investments are right for your situation? Need help getting on track? Check out my Financial Review/Second Opinion for Individuals service for detailed guidance and advice about your situation.

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  1. Excellent list Roger. All are these investing mistakes are harmful to investors.

  2. I was aware about my father’s ignorance from his investment and now he is taking out some time for managing the portfolio and making some profit but after this list post I’ll be able to increase his profits more and more.

  3. Great tips. Many investors are loss averse, so the idea of losing money doesn’t sound to appealing.

    I also think many people forget to rebalance. Rebalancing doesn’t have to conclude with you selling winners. You always allocate your contributions towards the asset that has deviated from it’s original allocation.

    And you brought up a really good point on “Assuming recent events will continue into the future.” I’m finding a lot of young investors are way too conservative with their long-term investment approach when they shouldn’t be at all.

    • Roger Wohlner says

      Thanks for your comment Ornella. You are right about a general aversion to losses. Your comment about using new money to rebalance is right on, this is a tactic I use with clients when we can. The whole issue of recency is a key one for investors of all ages. It is amazing that younger investors who have so much time and shouldn’t be concerned about short-term fluctuations are. On the other hand I can understand this because huge market swings are all they’ve seen in their short investing careers. I monitor this via my 24 year old daughter. I have encouraged her to take an aggressive approach with her 403(b) plan.

  4. Only a smiling visitant here to share the love (:, btw outstanding style .

  5. G’Day! Roger Wohlner,
    I was wondering on a similar note,, im looking for a good book to read on investing which would contain things like finding good stocks, avoiding beginner mistakes, pretty much the basics of building a portfolio.

  6. Great list, Roger!
    I know I have made every mistake on this list in gaining investment experience. Best not repeat any of these!

    • Roger Wohlner says

      Kevin thanks for your comment. Mistakes and experience are often our best teachers in investing and most other endeavors. Always nice when those mistakes are not too costly.

  7. Hey There Roger Wohlner,
    Thanks for the info, I am curious to know what are the possibilities due to which one may suffer loss by investing in mutual funds. I understand some risk is involved as usual but by knowing some specific examples of incurring loss, I will understand the issue better. So please share any incidemt you know and also indicate how the peroson might have avoided the mistake she/he made. Thanks in advance.
    All the Best

    • Roger Wohlner says

      Ronnie losing money in a mutual fund is not uncommon over certain periods of time. It depends upon the fund and what types of underlying investments (stocks, bonds, etc.) it holds. Almost any stock mutual fund lost money in 2008 for example when the S$P 500 index lost 37% and other major stock indexes lost even more. Nothing about investing in a mutual fund is guaranteed, one needs to understand the risks involved based on how the fund invests shareholder dollars.

  8. Great post Roger. It’s amazing how many times I see this type of stuff from clients.

    • Roger Wohlner says

      Thanks Robert that’s why your clients need the type of expertise and guidance that you provide to them.

  9. Great article, Roger. I believe some of these mistakes are made because some treat investments like a gamble. They invest without a plan and they don’t properly understand the volatility of the market. I firmly believe that everyone who wants to invest should follow market news for at least a year, but also educate themselves – know all the constants in order to face the variables.


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