Stock Investing: 10 mistakes to avoid for better results

Have you ever heard that investors are often their own worst enemy when it comes to investing? Whether novice or experienced, they sometimes make mistakes that can prove very costly.

In this blog post, learn more about the most common 10 pitfalls to avoid for profitable investing!

1. Ignoring your investor profile

Every investor has his or her own goals, investment horizon and risk tolerance. Your investments should reflect and respect all three.

When your financial advisor asks you questions to determine your profile, it’s important to answer honestly, so that he or she can develop a strategy that really suits you and helps you achieve your goals, without stressing you out.

2. Not having a strategy

We ended the previous point by mentioning the importance of having an investment strategy. Well, let’s talk about that strategy in more detail!

It’s essential to stay focused on your goals, and of course, to achieve them. Like a lighthouse, a strategy built on solid foundations is there to guide you and prevent you from losing sight of your goals despite the ups and downs of the market.

Here are some of the elements it should include:

• Where, when and how will you invest your money?
• How much do you need?
• Which investment solutions and products will you go for?
• In what proportions will you divide your money between these different investment solutions and products?
• Will you buy stocks, bonds, mutual funds, securities, etc.?
• How often will you make payments to your investments? For how long?

While taking your risk tolerance into account, your strategy should also describe your investment goals and the timeframe you have to reach them. Of course, it’s important to review your strategy periodically to assess its progress, see what’s working well and what’s not, and make adjustments as needed.

As independent financial advisors, we have the expertise to help you establish a realistic and effective plan. Don’t hesitate to contact our team!

3. Not diversifying

Continuing on from the previous point, your investment strategy should be DIVERSIFIED!

All financial advisors agree: it’s important to have a portfolio with diversified types of investments, to help offset losses from poor performance.

In other words, if some investments are going down, others will (hopefully) be going up, therefore minimizing your loss.

It’s an effective way to limit the effects of market ups and downs and achieve better long-term results.

4. Trying to anticipate the markets

Stock markets are difficult to predict, especially in the short term. Even experienced experts can make mistakes when forecasting stock market trends! Given this great uncertainty, it’s risky – indeed, highly inadvisable – for an “amateur” investor to try to sell when prices are high and buy when they’re low. This could lead to unnecessary losses and prevent you from enjoying even more positive results in the future!

Focusing on a long-term strategy and diversification is not only safer, it’s also more profitable.

Always remember the following principle: the longer you hold a stock, the more likely it is to generate a positive return.

5. Waiting for the “right moment” to invest

In an ideal world, you’d avoid investing your money just before a major market correction. It goes without saying!

But does it really matter in the long term? The short answer is, not really. Because what really counts is not perfect timing, but rather the passage of time and the regularity of your transfers to your investments.

Indeed, as mentioned in the previous point, investing over a long period of time is generally more effective than trying to predict the best time to invest (or withdraw) your money – especially as it is very difficult, if not impossible, to anticipate the course of the markets.

6. Let the news be your guide

When you’re an investor, watching the news can quickly become… frightening! Especially when the markets are predicted to go down. But you mustn’t panic when this happens. The same goes for a spectacular rise! Under no circumstances should headlines determine the management and composition of your investment portfolio.

At the risk of repeating ourselves: markets are unpredictable, you must always think long-term. Never lose sight of your strategy and rely on the expertise of your financial advisor.

7. Losing your cool

Emotions, especially fear, should not guide your financial decisions. When markets fluctuate (especially downwards), it’s important – once again – not to lose sight of your long-term strategy.

In addition, it’s important to remember that, although market prices have gone through periods of volatility over the years, they have always maintained an upward trajectory over the long term. Therefore, by withdrawing from the markets during a downturn, you run a high risk of incurring unnecessary losses and damaging the long-term performance of your investments. In short, don’t focus on the short term!

Also,  never forget that impulsive decisions (buying when prices are high and selling when they’re low) VERY rarely pay off!

When in doubt, talk to your financial advisor. He always works through a rigorous process and knows not to let his emotions and the state of the market sway him.

8. Relying on past performance

Past performance should not be the only factor considered when choosing where to invest your money!  Never forget that, when it comes to investing, the past is no guarantee of the future. In other words, just because a fund has performed well in the past doesn’t mean it will continue to do so.

9. Overestimating your knowledge

It’s been shown that overconfident investors are often those who multiply their trades, thinking they have the ability to… predict market prices. But, as explained in point number four, this is not a winning strategy!

When it comes to investing, humility is often the best attitude.

10. Ignoring factors under your control

As you’ll have gathered by now, when it comes to investing, a certain amount of carelessness is called for. Predictions, too many trades and emotions are not welcome in an effective investment strategy!

But there are some things you can control: how often you invest, how much you invest, how well you diversify your assets, your ability to stay calm and your strategy. These are the things you should be focusing on!