- Failure to diversify. You might be familiar with the saying, 'Don't put all your eggs in one basket.' By spreading your investments across different companies, industries, and asset classes such as stocks and real estate, you can reduce the risk of negative returns on your investment portfolio.
- 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 mistake often combines elements of both mistakes 1 and 3. For example, while technology stocks might meet all your criteria, your emotional responses to market fluctuations could result in an unbalanced portfolio.
- 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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