Investing can feel like a minefield, and it’s easy to make the wrong call.
Our brains are built for short-term survival, not long-term investing. That’s why the ‘obvious’ move is so often the wrong one. And because losses and charges compound in the same way that growth does, small errors can quietly cost you thousands of pounds over the years.
The good news is that most investment mistakes have nothing to do with intelligence. They come from emotion, habit, inertia and the lack of a clear plan.
This blog explores some of the most common investment mistakes we see, why they happen and the practical steps you can take to avoid them.
Why do so many investors get it wrong?
Behavioural experts have identified several biases that trip up investors.
We tend to feel the pain of a loss far more sharply than the pleasure of an equivalent gain. Psychologists call this loss aversion. We’re also prone to overconfidence, following the crowd and fixating on the price we originally paid for an investment.
Neither of these makes you a poor investor. Even seasoned professionals feel these instincts. The difference is having a plan that stops them from taking over.
Here are some of the other investing behaviours that can knock you off course. Many are easy to fix once you know what to look for:
Mistake 1: Letting your emotions drive your decisions
When the markets fall, the urge to sell can be overwhelming. Watching your portfolio drop by thousands of pounds in a week is unsettling, and getting out can often feel like the safest option.
But selling during a downturn turns a temporary fall in value into a permanent loss. It also means you’re likely to miss the recovery. When the global stock markets plunged in early 2020 as the COVID pandemic took hold, many who stayed invested recovered their losses within months, while those who sold at the bottom missed the rebound.
The opposite is just as common. Chasing last year’s best-performing fund or piling into whatever investment is making headlines often means buying at the top, just before prices cool off.
Trying to time the market is also a gamble. Some of the strongest days in the stock market tend to come soon after the worst ones. Stepping out to wait for calmer conditions can mean missing the gains that make up for the falls.
The answer is to take emotion out of the equation. Set a long-term plan and stick to it. Investing a fixed amount each month, known as pound-cost averaging, means your money buys more units when prices are low and fewer when they’re high. While it won’t guarantee a profit, it will help smooth out the ups and downs and take the guesswork out of timing the market.
Also, try to resist checking your portfolio every day. The less often you look, the less tempted you’ll be to react.
Mistake 2: Putting too many eggs in one basket
Concentrating all your investments in a single share, sector or country can leave you exposed if things go wrong. Many people hold a large chunk of shares in the company they work for, which means their job and their savings depend on the same business.
UK investors also tend towards ‘home bias’, favouring the British companies they recognise. Yet the UK makes up less than four per cent of the global stock markets, so a portfolio built mainly on UK shares can miss out on potentially lucrative investment opportunities in the US, Europe, Asia and beyond.
Diversification helps spread your risk. Holding a mix of shares, bonds, property and cash, across different sectors and regions, means poor performance in one area can be balanced out by better results elsewhere. Managed funds offer an easy and affordable route to diversifying your portfolio, giving you exposure to hundreds or even thousands of companies in a single investment.
Mistake 3: Overlooking charges
Platform fees, fund charges and dealing costs might look small on paper, but over the long term, they add up.
Say you invest £100,000 for 25 years with average growth of 6% a year. With total charges of 0.5%, your pot would grow to around £381,000. With charges of 1.5%, it would be worth around £300,000. That 1% difference would cost you roughly £80,000.
Many people have no idea what they’re paying in total, particularly on older pension plans. So, check the charges across your pensions, ISAs and other investments. The cheapest option isn’t always the best, but you should be confident you’re getting good value for your money.
Mistake 4: Not making the most of tax wrappers
Investing outside a tax-efficient wrapper when you don’t need to can mean handing more of your returns to HMRC.
Every adult can invest up to £20,000 a year in ISAs, with any growth, dividends and interest free from tax. But if you don’t use your allowance by 5 April, it’s gone for good. That makes investing a bigger part of tax planning for many savers in Leicester.
Pensions offer tax relief at your highest rate of Income Tax, and employer contributions effectively give you free money. We’ve covered these benefits in more detail in our previous retirement planning blogs.
Holding investments outside these wrappers has also become more expensive. The Capital Gains Tax allowance has fallen from £12,300 to £3,000 in just a few years. The tax-free dividend allowance is now only £500, and Dividend Tax rates for basic-rate and higher-rate taxpayers rose in April 2026.
Using your allowances every tax year should be a priority. If you already hold investments outside an ISA, a ‘Bed and ISA’ transfer can move them into a tax-free wrapper over time.
Mistake 5: Investing without a clear plan
Buying investments without a clear purpose is one of the easiest mistakes to make. If you don’t know what the money is for, how long you’ll invest it or how much risk you can handle, it’s hard to choose the right investments.
Taking too much risk with money you’ll need in the next couple of years can leave you short if the markets fall at the wrong moment. Taking too little risk can be just as damaging. Keeping your long-term savings in cash for decades could see inflation slowly eating away at their value.
So, before you invest, make sure you have an emergency fund in place. Our blog, What’s the difference between saving and investing?, explains why this foundation comes first.
Then, match each pot of money to a goal and a timeframe. You’ll probably be able to take more risk with your retirement savings in your 40s than with a house deposit you’ll need in three years’ time. Your investments should reflect both your attitude to risk and your capacity to absorb any losses.
Mistake 6: Falling for scams and ‘hot tips’
Social media is full of so-called ‘finfluencers’ promising quick profits from cryptocurrency, foreign exchange trading or the next big share. Some are well-meaning but inexperienced. Others are running scams.
The warning signs include pressure to act quickly, unsolicited calls or messages, and promises of high returns with little or no risk.
So, before investing, check the firm is authorised on the Financial Conduct Authority (FCA) register and use the FCA’s ScamSmart tools.
Above all, never invest in something you don’t understand. If an opportunity sounds too good to be true, it usually is.
Mistake 7: Setting and forgetting
Even a well-built portfolio needs attention. Over time, some investments grow faster than others, so your portfolio can drift away from its original balance and take on more risk than you intended.
Your life changes, too. A new job, marriage, children or approaching retirement can all shift your goals, investment priorities and timeframes.
Reviewing your investments at least once a year, and rebalancing when needed, will keep your portfolio in line with your plans. An annual review with your financial adviser is also a good time to check your charges and confirm that you’ve used all your tax allowances.
How can BDWM help?
Most investment mistakes come down to letting your emotions take over, paying too much in charges and tax, and investing without a clear plan. Thankfully, with the right support, you can avoid all of them.
Having an independent financial adviser on your side can give you an objective view when things get bumpy. It’s much easier to stay the course when someone has explained why your plan was built the way it was, and what to expect along the way.
At BDWM, our team of qualified financial advisers helps people across Leicester and the East Midlands invest with confidence. We’ll take time to understand your goals and attitude to risk before building a diversified portfolio that suits your circumstances. We’ll help you make the most of your ISA and pension allowances, keep your charges under control and review your investments as your life changes.
Contact us today for a no-obligation consultation. We’ll review your current investments, identify any costly mistakes and help you build a plan that works towards the future you want.