Embarking on your investment journey can be exciting, but before committing your savings, it’s smart to seek advice.
Whether you turn to the internet, artificial intelligence, or a professional adviser, most guidance tends to highlight positive steps for success.
While positive tips are helpful, many investors overlook how small mistakes can quickly unravel even the best-laid investment plans.
In this article, we’ll highlight some of the most common investment mistakes, and more importantly, how you can avoid them.
Every investor should set aside a contingency fund - capital that is safe, secure, and easily accessible.
This “safety net” supports your lifestyle and covers unexpected expenses, especially when markets are down. It also gives you cash to seize opportunities when markets present them.
Unfortunately, many people skip this step. Without enough liquidity, investors face two big risks when markets fall:
How to avoid it:
Aim to keep at least six months’ worth of expenses in a secure, highly liquid account. More is even better. This keeps you financially flexible and prepared for whatever the market brings.
“Don’t put all your eggs in one basket.” It’s a classic saying that too few investors actually follow.
For example, many Australians stick only to local shares, often ignoring overseas markets. If you invest only in the ASX300, your portfolio includes 300 companies from just one country.
In contrast, a global index (like the MSCI All Country World Investable Market Index) provides access to over 8,500 stocks across 47 countries. This diversity reduces risk and increases your chances of catching strong returns, wherever they appear.
Without proper diversification, you’re more likely to miss out on the best-performing investments, which can drag down your overall returns.
How to avoid it:
Diversify your portfolio across asset classes, industries, countries, and security types to maximise opportunities and protect against downturns.
Many investors devote too much energy to selecting individual stocks or timing the market highs and lows. While this strategy might seem attractive, especially with the media’s focus on picking “winners”, the evidence says otherwise.
Studies show that market timing and trying to pick top stocks account for only a small fraction of investment success. Worse, these tactics are extremely hard to get right. According to the 2025 SPIVA Australia Scorecard, over the past decade, the vast majority of managed funds underperformed the market. The odds simply aren’t in your favour.
How to avoid it:
Skip the guesswork. Create a long-term investment plan that suits your goals and risk tolerance and stick with it, regardless of market noise.
It’s tempting to chase investments that did well recently, assuming past performance guarantees future results. In reality, it rarely works out that way. Most funds that outperform in one period struggle to repeat that success.
How to avoid it:
Choose investments based on their fit with your broader plan and philosophy, not on last year’s “hottest” returns.
Human emotions are powerful, and investing can be an emotional rollercoaster. Markets move in cycles, and it’s easy to make impulsive decisions during booms and busts.
But reacting emotionally can lead you to buy high, sell low, or stray from your plan, often resulting in costly mistakes.
How to avoid it:
Focus on your long-term objectives and stay disciplined. Consider working with a trusted adviser to help you manage emotions, keep your strategy on track, and hold you accountable.
While investing is full of challenges, you can still achieve strong results by focusing on what you can control:
Set clear objectives, know your timeframe and risk profile, manage your cash flow, diversify wisely, and make informed decisions.
Take action with purpose, and don’t hesitate to seek professional advice if you need guidance.
Ready to take the next step towards smarter investing? Contact us today for a personalised financial plan or explore more insights on our blog.
The information provided is factual only and does not constitute financial advice. If you need to speak with a Financial Adviser before making a decision, you can contact us via the button below.