10 Common Investing Mistakes (and how to avoid them)
I've made plenty of mistakes when I first started investing, whether it was trading too much or investing too much money in one day, I was simply inexperienced. Looking at articles, it seems like most newbie investors tend to lose money in the short run. This isn't because investing is not for them or they should quit it all together, rather simple mistakes almost everyone entering into the finance world make. After seven years in the market, I’ve seen these mistakes firsthand, both in my own portfolio and in others’. In this article, I break down the 10 most common investing mistakes beginners make, why they happen, and how to avoid them.
#1: Confusing price with value
Do you know the famous Warren Buffet quote: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” I'm betting you've heard some variation of it somewhere, and it still stands to this day. Most people chase whatever is moving instead of asking what the business is actually worth. Hyped up companies such as GameStop in 2021 or more recently Rocket Lab USA and AMD might make you feel as though you are missing out if you don't buy in right now. However, this isn't always the case. You should think about investing in the company, not what the market is saying. If you generally like the company and the future, it does not matter what the price is at the moment. Stock prices swing every day, but the underlying business barely changes in the short term. That’s why the best long‑term strategy is to invest in the company itself, not the daily price. If you want to learn more about this, I made a separate article that goes more into detail right here.
#2: Letting emotions get in the way
Emotions are something that should not be in your head when you are investing. It's a common principle that people make worse decisions when emotions make decisions rather than thoughtful decision making. Going back to my first point, let's say a stock you really like falls 20% in a single day due to bad earnings and you are now down $100, evolutionary instincts have taught us to save what is left at the risk of losing more in the long term. However, make sure to evaluate WHY the company has gone down, is it because of A single bad earnings? A rumor? Or something actually damaging? Generally speaking, making decisions when powered by greed and fear can create massive mistakes for your finances. Before you click that sell or buy button, think about what you are buying/selling, and what you expect to get out of it.
#3: Expecting results waaaaaay too early on
AI is the future, or flying cars! Quantum computers are going to be released by the end of the year! Are all good thoughts, and they might likely all be true. I personally believe Ai is here to stay and will make developments in society, but in the long-term. The problem new investors make is buying into a company expecting their stocks to blow up within the next week or month. Creating truly revolutionary products or technologies can take years and in most cases decades. Take for example flying cars: even if the tech was created tomorrow and was flawless, the FAA would still have to create regulations, and multiple questions would have to be asked. Would people be allowed to fly these cars themselves? how about sky highways? How do we prevent hacking? Has this been tested for a long period of time? What makes this better than regular cars? Keep in mind that when this is happening the stock might fall for a number of reasons short term whether a state bans flying cars or a politician condemns them. Once all these questions have been answered, and only then, would the stock start increasing as most regulatory hurdles have been crossed and the company can start generating a clear revenue.
A personal example I have is SunHydrogen ($HYSR). I invested in them in Early April of 2021 and have held their shares ever since, they are aiming to create Hydrogen from only sunlight and water, and after looking at their website and their prototypes I decided to invest. While I have lost 70% on the stocks I still believe in the mission and understand just how long it takes to develop technology like this to mass production. This is also a simpler solution than something like flying cars or space travel, so imagine how much longer the latter would take! Investing in what you know/are familiar with can help you as you can develop a rough timeline for the company value to increase, instead of just guessing based on current hype. Remember, if you're buying a dream for the future, it's in the future, not the next year.
#4: Trading and selling too often
This one might be a bit hard for new investors to swallow (I know it was for me). But generally speaking, day trading or short-term investing leads to terrible losses. In one study over 95% of day traders lose money. 73% do make money, but that's only after holding a stock longer than a year (and at that point just long term invest and bump that number higher). There's not really much more to explain, if you do day trade, you will likely lose money. If you want to be successful in the investing world for more than a month, you'll need to invest how long-term investors do: by buying ETFs and large cap companies and holding for years. ETFs such as $QQQ, $SPY, and $VOO offer 10% average returns every year, which might not sound like much, but with compound investing it can make you a millionaire very easily through discipline. If you want to learn more, check out this other article by me that goes into further detail: The magic of compound investing: A get rich slow scheme
#5 Not Dollar Cost Averaging
Dollar. Cost. Average. It doesn't matter whether you are warren buffet himself, no one can perfectly time the stock market. Dollar cost averaging (DCA) is one of the most useful tools to reduce risk and increase your returns year over year. Sure, you might get lucky once or twice and get a really good discount (like putting all your money on an ETF after a massive selloff). However, most of the time this won't work out. Most of the time you would put all your money on a single day, and then the stock would drop further, but if you only put 1/10th of the total amount in per week, you can flatten the risk and increase profit, especially in the long term! Sure, buying in a lump sum might work out in the short term, but for long term investing and especially new investors who hit the panic button the second a stock shows a loss, dollar cost averaging is a better solution to counter emotions and panic.
#6: Misunderstanding "Diversification"
Diversifying is one of the BEST things you can do in your portfolio. I follow a rule that unless it's an ETF, a stock shouldn't hold more than 15% of your total portfolio value. You shouldn't follow my rule exactly, however, make sure to fit your own goals in (such as time horizon, risk, etc.) Nonetheless, lots of people misunderstand what Diversification means. Take for example I own $2000 in $QQQ, and $1000 in Nvidia. A new investor might think that this would be a more diversified portfolio than just putting $3000 in $QQQ, however they are both one and the same. If $QQQ drops Nvidia drops as Nvidia is in the $QQQ (they are both correlated). When diversifying, make sure you buy uncorrelated stocks, rather than just buying an individual company of an ETF you already own, otherwise you are just double dipping. If you had $2000 in $QQQ and $1000 in a mining company or shipping company, that is true diversification. Make sure you have two baskets, not just one filled with "diversified" eggs.
#7: Not having a defined process
If you can’t explain why you bought something or are still holding it, you won’t know when to sell it. A rule of thumb I use is that if I can explain to a random person why I bought a stock/ETF perfectly then I understand what I bought into and know when to sell. For example, I hold an ETF called $SMH, which has generated a 43% return in the past year that I have held it. If I were to explain to someone why I bought it, and why I won't sell now, I would say something along the lines of: "$SMH is a long term play, the ETF holds semiconductor companies that are the building blocks of Ai, I believe that SMH will be much higher in the next 10 years, and therefore continue to hold it". You should be able to do this with any company or ETF that you buy. This is why researching a company and doing due diligence (DD) is so important before you even click that buy button, make sure you can justify your position on it as if a professor asked you to explain your reasoning.
#8: Checking the Portfolio too often
As a new investor: Don't do this. This will only cause rule #2 to become even more common and cause you to panic sell, even if you don't think you will. If you feel compelled to check at the most, check it once a day after market close. This will help you understand where your portfolio is at without making too many rash decisions. The more you learn about investing and long-term holding the less you will check your account on a daily basis, as you start to truly understand long-term holding and forgoing emotions in the stock market.
#9: Ignoring Fees and Taxes
Even small costs can compound. High‑fee funds, frequent trading, and short‑term gains all eat into returns. Not to mention that if you trade too much some institutions might ban you from trading for a little while. If you are a long-term investor, you should especially take these into considerations. Even a .5% reduction in long term gains because of taxes or fees can result in tens of thousands of dollars gone and given to the government. Make sure you understand your tax bracket and all the fees of your platform of choice. Also, when investing in ETFs, make sure to look at the expense ratios, this is a % the company that manages the ETF takes for themselves to help manage the ETF. For example, if the expense ratio is 1% and you have $100 in the ETF, the company will take $1 away each year (or 1%) of your earnings. Most ETFs have very low expense ratios but make sure to check as they can also eat into your profits, especially if you have a larger portfolio.
#10: Ignoring the power of cash
Just because you have cash does not mean it needs to go in a stock. try and keep around 5% of your total stock portfolio in cash. This creates optionality, flexibility, and protection from downside. For example, if a hot new stock IPO's (and its of great value and interest to you) then you can spend some cash in order to get into the company and dollar cost average sooner. This also prevents you from acting on emotions and selling a stock you already own and getting taxes and fees on top of it. There’s also another benefit people overlook: cash gives you patience. When markets get volatile, having liquidity keeps you calm. You’re not forced into rushed decisions or desperate trades. You can wait for the right pitch instead of swinging at everything that moves.
Conclusion
Investing isn’t about predicting the next big winner or timing the market perfectly, it’s about avoiding the mistakes that quietly chip away at your returns. Every investor, including me, starts out making emotional decisions, chasing hype, or misunderstanding risk. What separates long‑term success from short‑term frustration is the willingness to learn, stay disciplined, and think in decades instead of days. If you can focus on understanding the businesses you own, diversify intelligently, keep your emotions in check, and build a process you actually follow, you’re already ahead of most beginners, and will make more money in the long run. No one can successfully day trade for 40 years, no one has top-tier emotions for deciding when to buy and sell a stock, and no one can time the market.
Of course, there are a lot more rules than just 10, so look online for more resources or consult my blog, I have lots of advice and tips on here and will continue to post more on here and LinkedIn. If I wanted you to remember one thing from all these rules, I would say Discipline. discipline is the ultimate decider on who makes and loses money, be patient, and you will make money in the market.
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