We all make mistakes in life, but when it comes to investing, these missteps can lead to poor returns and significant losses.

Some investment mistakes are immediately obvious, while others may take years to reveal themselves—and by then, it could be too late to fix the damage.

Whether you're an experienced investor or just getting started, here are seven common mistakes to avoid in your investment journey.

<h3>Mistake 1: Having a Concentrated Portfolio</h3>

One of the biggest mistakes investors make is concentrating their portfolio in a small number of stocks or a single asset class—essentially putting all their eggs in one basket. This means the performance of a limited set of investments determines the fate of your entire portfolio.

To avoid this, diversify your investments. Spread them across different geographic regions, industry sectors, and asset classes. Diversification reduces risk and minimizes the impact on your portfolio if one area underperforms.

<h3>Mistake 2: Missing Out on Compounding</h3>

Compounding allows you to earn returns not only on your initial investment but also on the returns that accumulate over time. To maximize the benefits of compounding, consider reinvesting the income generated by your investments. The earlier you start investing, the more time your money has to grow, reducing the amount you need to save to reach your financial goals.

<h3>Mistake 3: Not Investing Regularly</h3>

An effective strategy is to invest consistently over time, known as dollar-cost averaging. This involves investing a fixed amount at regular intervals—whether the market is up or down. When prices are high, your fixed investment buys fewer units, when prices are low, it buys more. The goal of dollar-cost averaging isn’t to predict market movements but to smooth out the impact of market fluctuations by removing timing from the equation.

<h3>Mistake 4: Letting Emotions Drive Your Decisions</h3>

Emotions can cloud our judgment when investing. During market upturns, the optimism from rising values may lead you to take on more risk than is wise. Conversely, fear during market downturns can cause you to reduce your investments or even exit the market at the wrong time. It’s important to assess whether your decisions are driven by logic and strategy, or if they’re being influenced by temporary emotions.

<h3>Mistake 5: Having Vague Investment Goals</h3>

Investing without clear goals is like setting out on a journey without a map. To stay on track, you need to define what you’re working toward. Are you saving for a home deposit, funding your children’s education, or planning for retirement? Clearly defined goals will shape your investment strategy and help you determine the level of risk you’re comfortable taking to achieve them.

<h3>Mistake 6: Poor Record-Keeping</h3>

Every time you buy or sell an investment, you’ll receive important documentation for tax purposes, such as details about capital gains or losses. At the end of the financial year, you’ll also get information about distributions from your ETFs.

Misplacing this documentation can cause headaches when tax season arrives. Make sure you store it safely and keep track of it. For added convenience, if you’re investing with <b>Betashares</b>, register with <b>Link Market Services</b> to receive email notifications about any relevant information. This will include distribution statements, annual investment summaries, and tax-related documents. Registration is quick, easy, and free—making your record-keeping far simpler.

<h3>Mistake 7: Paying Too Much in Fees</h3>

While you can’t control market fluctuations or the performance of your investments, you can control the fees you pay. One of the biggest, but often overlooked, mistakes investors make is paying excessive ETF management fees. At first glance, small differences in fees may seem insignificant, but they can significantly impact your returns over time. The lower the fees, the better, since management fees are charged as a percentage of your investment in the ETF.

<h3>Key Takeaways</h3>

Even seasoned investors make mistakes, but by being aware of common pitfalls, you can stay on track to building a successful portfolio. To avoid costly errors, remember to:

Avoid these 13 common investing mistakes

Video by Trading 212