What are the top investment mistakes, according to the CFA Institute

The valuable lessons gained from investment mistakes are a road map to successful investing. 

You don’t learn anything new from the wins. You learn from the losses. 

Your wins are potentially dangerous if they lead to being overconfident and cocky.   

Ray Dalio, a top geopolitical macro investor, has a saying, “pain plus reflection equals progress.”

Paul Tudor Jones, ace market trader, also said,

“If there was a franchise for humble pie, oh my lord they’d be a mile long to own that because we all had huge gulps of it — me included.”  

La creme de la creme of the investing world reached the apex of their career by analyzing their investment mistakes. 

So let us zero in on the top investment mistakes;

Investment Mistakes
Stock market chart patterns

“pain plus reflection equals progress”


Over-optimism and having unreasonable return expectations are some of the top investment mistakes 

Having no clearly defined investment goals is another mistake. What is your investment time frame, long-term or short-term? Often investors focus on short-term returns or the latest investment craze instead of their long-term investment goals.

Not diversifying is another investment mistake

Diversifying prevents a single stock from drastically impacting the value of your portfolio.

Focusing on the Short Term is another potential investment mistake. It’s easy to focus on the short term, but this can make investors second-guess their original strategy and make careless decisions.

Investment Goals

“Having no clearly defined investment goals is another mistake”


Overpaying or selling too low is also high on the list of investment mistakes

A too-large position is also on the list of top investment mistakes for traders particularly. 

One study shows that the most active traders underperformed the US stock market by 6.5% on average annually, according to The Journal of Finance.

Paying too much in fees, and focusing too much on taxes and tax-loss harvesting, is also high on the list of investment mistakes.  

Another investment mistake is not reviewing the portfolio regularly

Quarterly or annually and checking that you are on track or need to rebalance your portfolio.

Misunderstanding risk features high on the list of investment mistakes commonly made. Excessive risk can take you out of your comfort zone, but too little exposure to risk may result in lower returns that do not reach your financial goals. Recognize the right balance for your situation.

“Investing with emotions is top on the list of investment mistakes” – Win Investing

Not knowing your performance is another shortfall

Frequently, investors do not track the performance of their investments. Review your returns to see if you have reached your investment goals, factoring in fees and inflation.

Tuning into noise is on the list of investment mistakes 

Reacting to the Media and negative news in the short-term can trigger fear, so remember to focus on the long run.

Not Keeping macro data on your radar like inflation is another investment mistake

Historically, inflation has averaged 4% annually.

Value of $100 at 4% Annual Inflation

After 1 Year: $96

After 20 Years: $44

Trying to time the market rather than spending time in the market is another investment mistake

Market timing is difficult to do, and remaining invested in the market can generate much higher returns, versus trying to time the market perfectly.

Not doing your due diligence checks is also on the list of investment mistakes 

Check your advisor credentials through sites like BrokerCheck, which shows their employment history and complaints.

Moreover, take active steps to ensure that you are working with the right advisor and that your goals are aligned.

Investing with emotions is top on the list of investment mistakes

Try to remain rational during market fluctuations. Chasing Yield High-yielding investments often carry the highest risk. So, assess your tolerance to risk before investing in risky assets.

“Not being well-diversified exposes investors to higher risks”
Win Investing

Lower on the list of investing mistakes is putting off a plan to invest

Take an example, where two people are investing $200 monthly with a 7% annual rate of return until the age of 65. If the first person started at age 25, their end portfolio would be $520K, if the other started at 35, it would total about $245K.

Not controlling what you can is also on the list of investment mistakes

According to the CFA Institute. “While no one can predict the market, investors can control small contributions over time, which can have powerful outcomes,” notes the report. 

To help avoid these common investing mistakes, investors should try to stay rational and focus on their long-term goals. 

Building a solid portfolio involves assessing the following factors, according to the report:

  • Financial goals
  • Current income
  • Spending habits
  • Market environment
  • Expected returns


Not being well-diversified exposes investors to higher risks.  

Holding one concentrated position can drastically impact the value of your portfolio when prices fluctuate.

The optimal diversification for a large-cap portfolio is holding 15 stocks, according to the CFA Institute. A well-diversified portfolio also helps to achieve the highest returns relative to risk. When it came to a small-cap portfolio, the number of stocks rose to 26 for optimal risk reduction.

The report also noted that investment strategies vary according to an investor’s requirements and recommends investors seek financial help to find an optimal balance, according to their goals.  

Overtrading, or investing, is another investment mistake 

Trade can rake up fees, which can impact your overall portfolio performance. “A separate study showed that the most active traders saw the worst returns, underperforming the U.S. stock market by 6.5% on average annually,” noted the report. 

So, with these common investment mistakes in focus, perhaps it will help you along a successful investment journey to build a diversified portfolio for building long-term wealth. 

Check out Wealth training company for further inspirational ideas. 

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