3 common investing mistakes I think you need to avoid

These three common investing mistakes are easy to avoid, but most investors get caught out by them, says Rupert Hargreaves.

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.

It is relatively easy to make money from the stock market over the long term. Unfortunately, many investors end up making a few critical mistakes over their investment career that can seriously impede investment returns. 

With that in mind, I’m going to highlight three of the most common mistakes investors make and what you can do to avoid repeating them.

High costs

As investors, there are only really two things we can control when it comes to the stock market. The price we pay to acquire assets and expenses. Deciding how much to pay for an asset can be a complicated process.

Making sure you are paying as little as possible for a stockbroker’s services, however, is relatively straightforward. Today, there’s a range of low-cost stockbrokers that offer dealing services for £15 or less, and most charge significantly less if you’re investing in funds.

Account administration fees have also dropped rapidly over the past few years. Today, you can open a trading account for as little as 0.25% per year, a significant drop on the 1% or more managers used to charge.

The impact the lower fees will have on your returns over time cannot be understated. According to my calculations, a saver with £1,000 in an investment account charging 1.5% a year in management fees, would see their money grow to be worth £1,553 over the space of a decade, assuming an annual return of 6%. If the same saver used a lower-cost account with a yearly charge of 0.25%, their money would grow to be worth £1,749, a difference of £196, or 11.2%. That’s why it pays to keep an eye on charges. 


Another mistake that can substantially impact your returns over time is overtrading. The cost of jumping in and out of investments every couple of weeks or months might seem inconsequential at the time, but over the space of several years, these costs can add up. As well as increased commissions, you’ve also got to take into account costs, such as stamp duty, capital gains tax, and the fee you pay to market makers as part of the bid-offer spread. Jumping in and out of investments regularly also doesn’t give enough time to let the investment case play out.

Multiple studies have shown that investors are quite bad at timing the market, i.e. getting in at the bottom and out at the top. Therefore, in my opinion, it isn’t worth trying to time events. Instead, I believe buying and holding quality companies is better for your portfolio over the long term. It also reduces the risk that you’ll make a mistake.

A long-term view

The third most common mistake I think investors make is not taking a long enough view when planning their investments. It’s almost impossible to tell what the future holds for the stock market in the near term. But over the long run, and I’m talking about over the next 10 or 20 years, there’s a very high chance the market will be above the level it is at the moment. 

This is why it’s best to take a long-term view when picking stocks, and not guess what will happen in the short term. We don’t know what’s going to happen in the near term and, therefore, trying to guess could only lead to losses.

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 considered so you should consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »