3 Mistakes Even the Most Seasoned Investors Risk Making

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Just because you’ve been an investor for many years doesn’t mean you won’t stumble. Read on for some pitfalls to avoid. 

When you’re new to investing, it’s easy enough to make some mistakes that cause you to lose money. But you might assume that once you’ve been investing in your brokerage account for five years, 10 years, or longer, you’re pretty much immune to those blunders.

Unfortunately, that’s not necessarily the case. Here are a few risks even the most experienced investors risk falling victim to.

1. Timing the market

Your goal as an investor is generally to buy at a low and sell at a high. And so to that end, you may be tempted to time the market — that is, to try to capitalize on downturns by buying stocks when you think they’ve reached their lowest point.

The problem with this approach is that it’s hard to determine when stocks have really hit a low. And if you force yourself to wait for the lowest price, you might miss out on the opportunity to snag a good price, even if it’s not the best price.

That’s why a much better approach to investing is dollar-cost averaging. This system has you investing in specific assets at preset intervals, regardless of market conditions. It’s a good way to avoid the market timing trap and miss out on the opportunity to profit on stocks in the long run.

Here’s how it might work. Let’s say that based on your income, you’re able to free up $100 a month for investing purposes. Rather than try to invest at a low by checking the value of the S&P 500 index every day, you’d instead commit to buying $100 worth of an S&P 500 ETF on the 15th of the month.

Some months, that’ll likely mean buying at a high. Other months, it’ll likely mean buying at a low. Over time, you should come out ahead financially by snagging more shares when prices are lower and avoiding market noise that might otherwise keep you from investing. Time in the market is more important than timing the market.

2. Panic selling when things go wrong

If you’ve been investing for years, then you’ve probably experienced your share of market volatility. But still, it’s hard to control your emotions when you see the value of your portfolio plummet.

One thing you don’t want to do, however, is sell investments at a loss the moment their value declines. Doing so only guarantees that you’ll lock in that loss officially, whereas waiting things out could make it so you’re not losing money at all.

A good way to avoid panic selling? Remind yourself what you’re investing for. If you’re 45 years old and are inclined to sell stocks in a panic, but you have those stocks earmarked for your retirement, you may want to remind yourself that there are many years for your portfolio to stage a recovery.

3. Checking your balance too frequently or infrequently

Checking your brokerage account balance every day could end up being a pretty bad thing for your mental health. That’s because stock values have the potential to shift dramatically overnight. And if you check in too often, you may be more likely to sell at a loss in a panic.

In fact, checking your portfolio once a quarter instead of once a day could reduce your chance of seeing a moderate loss of 2% or more from 25% to 12%, according to Betterment. And seeing fewer losses could lead to less impulse selling.

At the same time, you also don’t want to ignore your portfolio for months on end. It’s possible for the value of your investments to shift over time, so checking in once a quarter could help you keep tabs on your holdings and make strategic decisions around rebalancing.

Being a long-term investor won’t guarantee that you’ll never make a bad call when it comes to your portfolio. But try to do your best to avoid these mistakes, as they could prove costly.

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