Even relatively experienced investors can make basic ISA errors, and I had my share in 2024. Here are three of the most glaring.
Mistake 1: treating investing like gambling
After thoughtfully building up a balanced portfolio of FTSE 100 and FTSE 250 stocks, I decided to have a bit of fun with the cash I had left.
So I invested in a couple of volatile stocks: James Bond car maker Aston Martin Lagonda and grocery logistics specialists Ocado Group.
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Both had taken an absolute battering, crashing around 96% and 86% peak to trough. I convinced myself they must be bargains. They weren’t.
The Aston Martin share price is down 49.32% over 12 months, while Ocado is down 57.77%. Investing is fun but it’s not a game. And it’s definitely not a punt. These two flops have dragged down my performance in an otherwise successful year. I won’t be so rash in 2025.
Mistake 2: making a big macro call
I had 2024 all mapped out in my head. This was the year when interest rates would tumble and high-yielding FTSE 100 stocks would surge as a result.
As yields on cash and bonds fell, ultra-high-yielders like Legal & General Group and Phoenix Group Holdings look even more attractive.
Yet with inflation proving sticky, rate cuts have been in short supply. We may have to patient in 2025 too. My mind map was rubbish.
As Warren Buffett warns, no investor can repeatedly and accurately predict the future. The Legal & General share price has fallen 8% over one year with Phoenix down 3%.
As mistakes go, this isn’t the worst. The two insurers yield a bumper 9% and almost 11%, respectively, and I’ll reinvest every dividend to buy more shares at the lower price. And who knows, maybe interest rates will fall faster than expected in 2025, and the shares will rise too. That’s not a prediction.
Mistake 3: obsessing about past performance
Even rookie investors know past performance is no guide to the future. The warning appears on every investment ad. Alas…
Two years ago, I named Intermediate Capital Group (LSE: ICG) my top pick for 2023, but didn’t have the cash to buy it myself. Last Christmas, I discovered the private equity specialist had lived up my high expectations: its shares had jumped more than 50%.
I kicked myself, but still didn’t buy it. I thought I’d missed my chance. Yet the Intermediate Capital Group share price is up another 28% this year. The trailing 3.73% yield would have lifted my total return above 30%.
I think it’s a great company but I missed out because I was obsessing over all the performance I had lost out on.
This looks like the opposite of Mistake 1, but in fact it’s the same. Rather than looking at company fundamentals, I’d been watching the share price. In football they call it ball watching.
Intermediate Capital Group looks nicely placed to deliver organic growth as private capital markets grow, and it’s raising record amounts of funds. First-half profit before tax rose 21% to £196m, with a stunning 55% profit margin due to operational efficiency. And it looks solid value trading at 13 times earnings. I should be looking at figures like these, not performance. I’ll try to put all this right in 2025.
