3 common mistakes experienced investors should avoid

Avoiding these three errors could boost your portfolio returns.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While many people find that they become better investors as they become more experienced, nobody is ever perfect. Even Warren Buffet, one of the most successful investors of all time, makes mistakes from time to time. Therefore, it is natural for all investors to have flaws which could hold back their portfolio returns.

With that in mind, here are three common mistakes which more experienced investors often make. Avoiding them could lead to a more profitable future for you and your investments.


With the FTSE 100 having soared to an all-time high in recent months after a stunning Bull Run, many investors are likely to be in profit. In many cases, they will have been able to generate high returns at least partly due to their own skill and judgement. For example, they may have been able to discover a number of strong performers that have beaten their respective sectors and indexes in recent years.

However, there is a danger – especially during a bull market – for investors to become overconfident. This is perhaps to be expected, since they have enjoyed a prosperous period. But it can lead to too much risk being taken, and an insufficient focus on the potential weaknesses of a particular stock. As such, reminding oneself that market conditions will eventually change could be a prudent method to overcome this particular mistake.


Linked to overconfidence is the idea of overinvesting. This also usually happens after a bull market has been in existence for a period of time. It is where an investor will see the high returns that have been on offer in recent months/years and decide that they need to invest a higher proportion of their wealth in the stock market.

While this can lead to even higher returns, it also leaves an investor in a less sustainable financial position. Should markets correct as they have done in recent weeks, it can mean an investor lacks cash to buy stocks at lower prices. And should there be a real-life emergency which requires capital, an investor who is 100% invested in the stock market may lack the cash to overcome it. As such, keeping some cash on hand could be a good idea.


With some sectors having performed better than others in recent years, it is understandable that some investors will have high concentrations in specific industries. They may have even added to their winning shares in the hope of generating even higher levels of profitability in the long run.

Doing so can increase portfolio risk, since a high proportion of wealth in a small number of sectors may mean there is a lack of diversity in a portfolio. This can lead to higher volatility and greater loss in the long run. Therefore, ensuring that a portfolio has exposure to a range of stocks and sectors, no matter what the outlook is for the economy, could be a shrewd move.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Start supercharging passive income with REITs!

Are REITs the ultimate investment for boosting income generated from a portfolio? Zaven Boyrazian explores some of the most lucrative…

Read more »

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »