- Failure to diversify. You may also recognise the phrase: ‘don’t put all your eggs in one basket’. If you spread your investments across companies, industries and even asset classes like shares & property you have less risk of negative returns on your portfolio of investments.
- Trying to time the market. We would all love to purchase our investments when prices are at the lows and sell when prices are at peaks. Some investors may get the timing right one time, but few, if any can claim to do it consistently.
- Letting your heart rule your head. Or, in other words, ‘don’t let your emotions guide your investment decisions.’ Having set criteria to assess your investments will reduce the chance of impulsive decisions. And these impulsive decisions can take over when the market is either soaring or slumping.
- Not rebalancing your portfolio. This is effectively mistakes 1&3 in practice. For instance, technology may tick all the boxes, but your stock purchases may soon cause your emotions to take over and lead to you having a portfolio of stocks that is unbalanced.
- Not having a plan. What are your investment goals? How much risk are you prepared to accept? What is your investment horizon? All these questions must be answered to ensure that you are headed in the right direction.
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