Here at the Fool UK, we think it’s perfectly possible for humble private investors to generate huge wealth from the stock market. That said, there are a multitude of ways to waste your time that could really hinder returns.
Here are just five to be wary of.
1. Constant vigilance
Truth be told, there are very few things you can control as an investor beyond how much of your money you put to work and what you choose to buy. That doesn’t stop many from tracking every percentage point move in their portfolios.
Clearly, adopting a ‘buy and completely forget’ mentality when it comes to investing isn’t advised, but nor is constantly checking your investments every hour of every day. The latter can lead to unnecessary actions being taken, the costs of which mount up and dent performance.
If you find yourself logging in with alarming frequency, it may be worth questioning whether your holdings truly match your risk appetite.
2. Holding too much cash
Just as being too vigilant when fully invested can be counter-productive, so too can sitting on the sidelines waiting for a crash before putting your money to work. As the old adage goes, it’s time in the market not timing the market that matters.
There’s nothing wrong with holding some cash in reserve, of course. Just be aware that the longer you refrain from investing it, the greater the drag on your returns will be. A better solution might be to take advantage of pound cost averaging.
3. Comparing your returns to others
Countless psychological studies have shown that our level of happiness doesn’t increase much after we achieve a certain level of income, even if the latter continues to rise. What’s more important — but ultimately a waste of time — is how we perceive our success compared to that of our peers.
It’s worth remembering this when investing, particularly as social media is littered with people boasting of their winners (and usually staying quiet about their losers).
Don’t waste time wishing those gains were yours — the only portfolio that matters is your own.
4. Reading bulletin boards
It’s easy to become attached to stocks we hold. Therefore, checking in with more bearish views via a public forum sounds good in theory.
Unfortunately, bulletin boards have a habit of attracting people whose sole intention is to make money through manipulating others. Those wanting to buy a stock as cheaply as possible might, for example, post lots of negative comments about a company from multiple accounts in the hope that others will sell in a panic.
The message here is simple: don’t base any investment decisions solely on something you’ve read on a forum from someone you don’t know. Spend more time doing your own research.
5. Building the ‘perfect’ portfolio
Countless articles have been written on the subject of asset allocation — namely, how much of your money you should put into shares, bonds, gold, property and so on based on things like your age and attitude to risk.
While clearly an important consideration, the fact that opinions vary indicates this isn’t — and never can be — an exact science.
Don’t obsess whether you hold, say, 70% or 71% of your capital in equities — just go for a ‘good enough’ approach that matches your needs as closely as possible and allows you to sleep at night.
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Paul Summers has no position in any of the shares 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.