Cut Your Potential Losses & Avoid the Top Investment Mistakes

Cut Your Potential Losses & Avoid the Top Investment Mistakes


It’s human to make mistakes, and all of us have made mistakes at one time or another. But some mistakes are more costly than others. Investment mistakes certainly fall into this category. A sour investment not only comes at the cost of money lost, but also the opportunity cost of financial growth that could have come from another, more sound investment.

Thankfully (for you), nearly every investing error has already been made countless times before, which means you can learn from others’ mistakes and avoid making them yourself.

We’ve compiled some of the most prevalent mistakes investors make. Learn from them now so you don’t feel their (financial) pain.

Start Investing in Your Future

Get access to the The 5 Greatest Wealth Creation Strategies, today!

Download My Guide

Investing Without a Plan

If you don’t know what you’re trying to accomplish with your savings, how do you know what to invest in? Of course you want to save enough for retirement or to cover your child’s tuition. But how much money do you need, and in how many years?

Your investment strategies, portfolio structure, and even individual assets need to be tailored to your goals. The latest trends or short-term gains can’t ever overrule your long-term goals.

Once you define your goals, then you need a plan. And research has proven that investors who create a written plan significantly outperform those who don’t. A strategic plan that aligns with what matters most to you is an absolute necessity. With a plan, rumors, future predictions, stories, quick tips and sudden market expectations can never impact your strategy. Disciplined investing that follows your strategic plan maximizes the likelihood that you’ll achieve your goals.

Taking an Inappropriate Level of Investment Risk

Investment risk is not just the risk of losing your money – it also helps define your return expectations. And investors often take too little risk with their investments. All investing comes with varying amounts of risk. Low risk investments often directly correlate to lower expected returns.

Many investors fear losing money and choose the “safer” path. But there are no true certainties, and the cost of that safer path can be additional returns that higher-risk assets would have yielded.

Relatively young investors stand to lose a lot with an investment strategy that isn’t right for them, Decades ahead of retirement, if they invest improperly they will not get the yields needed to build wealth.

Your investments won’t follow a linear growth pattern – You’ll face some losses and experience gains. And as you approach retirement, many investors want to scale back their risk. As a rule of thumb, the further away from retirement, the greater investment risk you should be comfortable taking on.


Investing with Flawed Expectations

Investing in your future involves planning and designing a portfolio that aligns with your goals, and risk tolerance. This is the foundation to investing with realistic expectations.

Investors often envision much greater returns than they should reasonably expect. Even if they’ve created a strategic, diversified portfolio, they may fall into the trap of following “hot tips” and trends in search of short-term results...


Reacting to the Media

....Which leads us to the media. The news cycle is a constant churn of attention-seeking stories. Even when these stories are true they come with two caveats:

  1. News stories break after most industry experts already know the information (and have likely closed the window of opportunity)
  2. Facts provide little value without context

There’s some valuable information in the noise of the media, but what nuggets of truth apply to you and your goals? Experienced, investment managers collect data and information from various independent sources in order to conduct thorough analysis. A “hot tip” is never the driving force behind portfolio design or rebalancing.


Investing Without the Support of a (Competent) Financial Advisor

...And this leads us to the value of a seasoned perspective. A financial advisor has invested and managed money through countless scenarios. Their education, knowledge and experience give them the context needed to analyze what information is relevant to their clients’ goals, and what is simply noise.

Your investment advisor is there to help educate you on what your investments are doing and why, so you can  stay on track and stick to your plan. Amateur investors often fall into the the trap of succumbing to their emotions, and it leads to decisions that risk their long-term goals.  A professional removes emotion from the process and knows when to tweak a plan in order to yield results.


Failing to Properly Measure Your Investment Performance

Last but not least, measuring the success of your portfolio is key to understanding whether or not you’re on track to achieve your long-term goals. Speculating on the performance of your portfolio in the short term leads some people to second guess their strategy. But the short term isn’t the important timeframe.

The only measures worth tracking are those that indicate long-term performance. If you’ve invested your hard-earned dollars in a strategic, diversified portfolio, short-term gains or losses shouldn’t matter. Remember: the value of your funds will always fluctuate. But at the end of each year, and as those years build on one another, your carefully-crafted portfolio will progress toward your goals.


Are You Making Big Investment Mistakes?

The average investor has made the mistake of trying to time the market and acting on “hot tips”. And if you’re one of them, you shouldn’t be embarrassed. What’s important is that you recognize how this can negatively impact your success so you can do better. 

Whether you need to adopt a more methodical outlook on your investments and/or seek the oversight of a professional, becoming aware is a great first step. You may even need to rethink or create an initial strategy. And we can help.


Download a copy of The 5 Greatest Wealth Creation Strategies and learn how you can invest for a wealthier future.

Download My Guide

About Greg Hammond, CFP®, CPA

Greg Hammond is the chief executive officer of Hammond Iles Wealth Advisors, and co-founder of Planned Giving Strategies®. Greg leads a team of professional financial advisors providing customized wealth management and investment solutions for high-net-worth individuals, families, companies, and charitable organizations across the U.S.