The Big Picture created a top ten list of the most common mistakes that investors tend to make. I really like the list so I put the highlights here. If you want to read the entire description and discussion, click over to the article and learn a bit.
My favorite “error” is number 3 ‘You and your behavior is your own worst enemy.’ I see this frequently. People hear about a “cool stock” at a holiday party and buy it on Monday. Or they hear about a hot technology on some talk show and then try to invest in that rapidly growing field.
- High fees are a drag on returns
- Reaching for yield
- You (and your behavior) are your own worst enemy
- Mutual funds vs exchange-traded funds
- Asset allocation matters more than stock picking
- Passive vs. active management
- Not understanding the long cycle
- Cognitive errors
- Confusing past performance with future potential
- When paying fees, get what you pay for