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The One Mistake All New Investors Make

28.01.21

‘Learn from the mistakes of others, you can’t live long enough to make them all yourself’ -Eleanor Roosevelt

While it may be tough to admit, everyone makes mistakes throughout their investing careers, whether it be a missed opportunity or the opportunity you wish you missed.

Ultimately though, a well thought out investment plan is far more likely to end in success than failure, while keeping your funds ‘safe’ in a deposit account is a surefire way to lose money as inflation slowly erodes your earnings.

Here, I will discuss the one mistakes all new investors tend to make in an effort to help you sidestep this investment pitfall.

Following the crowd

If following the crowd worked, we'd all be millionaires.

You see it all the time, a temporary market slump brings hysteria, and previously level-headed investors throw their long-term investment plan out the window amidst all the panic, selling at the least opportune time. In March last year, we saw markets fall over 30% only to hit all-time highs six months later. Many of those who sold at the bottom remained on the sidelines during the subsequent market rally, no doubt licking their financial wounds.

It's worth noting that this is a two-way street. Everyone's investment history is tainted not just by realised losses but by the 'ones they sold too soon.' Realising profits too early can have a detrimental effect on your portfolio returns over time. Most investors will be lucky enough to be invested in a handful of mega-growth stocks in their lifetime. How they manage these investments is imperative to their portfolio's overall success.

The one you sell too early may often haunt you more than the loss you actually realised. While it's tough to accept losing say, 20% of your position on a specific investment, selling your position for a small profit, only to see that asset jump 1000% a few years down the line can be a harsh life lesson.

You're going to go through periods where every fiber of your being is telling you to sell a stock you still believe in because of some temporary slump or a brief spike. Stick to your guns, and over time you'll reap the rewards of a long-term investment strategy. Keep changing your mind, and your returns will be eaten away by your indecision.

For many investors, a great way to avoid the mental anguish that comes with watching your stock picks rise and fall is to invest in a broad basket of stocks through an ETF. This passive exposure allows you to participate in the rising tide of the market without getting caught up in the individual stock movements, keeping the aforementioned behavioural fallacies at bay.

At Holdun, we manage our family’s money alongside that of our clients. If you would like to learn more about Holdun Funds, see below:

Holdun Income Fund

Holdun Opportunity Fund

Holdun Funds Real Estate

Find out how Holdun can help you create a brighter financial future by reaching out to us at info@holdun.com. We look forward to hearing from you!

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