17 Investing Mistakes To Avoid In The Stock Market

Stock Market mistakes

Investing in the stock market is easy when you follow a strategy but that doesn’t mean that mistakes won’t be made. I made tons of mistakes when I started because I didn’t know what I was doing, some of which I mentioned in my first post on how to start investing for beginners. Sometimes we see mistakes and are able to address them immediately but other times we might not be so fortunate as it’s still very easy to make mistakes without even knowing it’s a mistake.

In this post, we’ll look through many of the most common mistakes most new and seasoned investors make when they invest in the stock market. I’ll also talk about some of the mistakes I made and what actions I took to address those mistakes. If you’re not sure about why you’re not making the returns you feel you should be making or consistently see yourself in the red, then read on.

Investing mistakes to avoid

Making mistakes while investing in the stock market happens to both new and experienced investors. A lot of lists will have the same points so I’ve compiled this list based on some of the mistakes I’ve made and rectified and mistakes I’ve been warned about by my peers. So you can have a full itemised list all in one place.

Mistake #1 – Not having a plan

Investing is easy to get started with as there are so many platforms that let you trade with as little as £1 and are fully supported on your mobile devices. For example, one of the platforms I use is Trading212 which allows me to open a free investment ISA in minutes after registering.

However, even though it’s easy to start investing, a huge mistake would be to start investing without having a plan. This means not having a goal as to what you want to achieve with your money and also not having a strategy with how you will invest your money. There are so many questions that need to be answered so that you can actually build wealth and not just use a trading platform like any other savings account where your money is stored.


You taken the right step by deciding to invest in the stock market but when you have created your account, write down what your goal is with investing. This could be anything like making a million, having a regular passive income with dividends, etc. You goal is your starting point to your final destination so make sure you know what that is.

The worst possible scenario is that you create your investment account but then lose your money. I’ve written a post that details how you can create an investment strategy that step-by-step shows you how you can create a good investment portfolio. Its talks about the strategy I use even till today.

Mistake #2 – Trying to time the market

Have you ever played first-person shooter games of fantasy adventure puzzles games like the Prince of Persia where you need to time your jump to beat the level? How many attempts did it take you? If you made it on your first attempt then you’re probably a very good gamer or just lucky. In the stock market, some can get lucky but luck should not be something you rely on.

I’ve said this before in so many of my previous posts. Timing the market is not a good strategy for making money, especially in the stock market. That’s because nobody knows what’s going to happen. It might have happened for some but for millions of other investors, it, unfortunately, hasn’t worked out.

One of the key differences between investing and gambling is that investing is calculated while gambling is a stroke of randomness. Is trying to time the market a little like gambling? I wrote a post on investing and gambling and identified why timing the market could be gambling your money away. Click here to read it.

What to do instead

You might find that investing small amounts of money regularly into the stock market may be a slow approach to building your wealth but this ‘get rich slow’ approach works very well towards building your portfolio and building your financial ability to invest for the long term.

Recommended Reading: What Is Dollar Cost Averaging? All You Need To Know

Mistake #3 – Picking stocks blindly

One of the biggest mistakes some investors make is to buy stocks that they don’t know anything about. Warren Buffet, once in an interview on CNBC said that when you’re buying shares in a company, you should think of it as essentially buying a business. INvesting without know what the business is or other such important details isn’t investing.

It’s ok to follow the crowd sometimes because it can work out and make you some money but the stock market isn’t a game of roulette. If you want to pick stocks that are right for you then along with your investing plan, there are a number of points your need to consider such as the companies growth over the last few years, its current share price and where the company will go in the future.

You might be interested in reading about how I pick my stocks. I have a strategy and a clear plan. I also avoid trying to time the market with my picks. If I’m going to buy, then I’ll buy right at that point and not when I think the price will fall.

Mistake #4 – FOMO (Fear Of Missing Out)

Once the train has left the station, running after it will only come at a loss to you. The explosion of GameStop and AMC brought in so many new investors that it crashed a lot of trading applications. The influx of new investors is brilliant for the stock market as it pumps in more money which means more profit in the long term.

But be cautious as FOMO can lead to investing in companies that you don’t know anything about which is mistake #3 and can lead to investing on an emotional basis. You could have used that money on other more stable investments which in the long term will grow your wealth rather than just giving you a bumper pay check for the short term.


Invest intelligently and take a step back. Warren Buffet said to be fearful when others are greedy. Take a moment to analyse the situation before making an investment decision.

Mistake #5 – Having the Shiny ball syndrome

The shiny ball syndrome is when someone constantly changes their goals every time they see something new. This is a bad habit when it comes to investing and usually happens to new investors who have just started and are not seeing the results they thought they would after just a few months.

Adapting to see what works for you is recommended but as long as its gradual and controlled by having a plan. Planning is extremely important when investing because a good plan should also have an exit strategy if things aren’t working out. However, constantly changing your goals just because something is new is a bad strategy and probably a habit that you should quickly drop.


Unfortunately, investing in the stock market requires time to really see great results. Warren Buffet was in his 80’s when he became a billionaire. Be patient and stick to your plan. A good plan will help you invest well but if its not working out then it will help you to fail fast. Failing fast is good because it makes sure you don’t lose too much.

Mistake #6 – Going all-in on penny stocks

Penny stocks are extremely volatile and can either earn you a lot of money or make you lose the entire investment. Although investing in the stock market does mean that you’re risking your capital which means that you can lose your investment, penny stocks are an even greater risk.

Anything can happen in a day or it might take years but penny stocks don’t have the same sort of backing that stable companies have. An example is HCMC, a widely popular penny stock that is currently valued at less than a penny. Many investors have invested thousands in the hope of a massive return and its basis is not the company’s current profits (it’s actually in a loss), rather the hope is that HCMC will win a lawsuit they have ongoing with a giant in their industry.

HCMC had a bit of a run but dropped back down to its lowest levels almost instantly.

What you should do instead

Penny stocks are not bad as long as you manage your risk. Allocating a large portion of your investment in penny stocks is not a good idea. The sensible approach to penny stocks is to invest small amounts – money that you don’t mind losing, and then once you have some profits if you want to keep holding the stock, remove your initial investment so that the investment becomes risk-free.

Mistake #7 – Not diversifying

Diversifying your portfolio is the best way to grow your wealth. A mistake that many new investors and even some experienced investors make is that they don’t diversify their portfolio enough by only investing in a few companies or focusing all the time and money into the same industry.

The problem with not diversifying your portfolio is that you are in greater risk of losing your money as if the industries that you invest in are performing poorly, then all of your stocks will suffer. Its important to balance out your portfolio so that when one industry is performing poorly then your other holdings will hopefully help to reduce your losses.

Be careful not to over-diversify though.

Recommended Reading: 5 Ways to Diversify Your Investment Portfolio

Mistake #8 – Forgetting to budget

Investing is suppose to help you grow your wealth. That’s why it’s important to make sure you invest regularly but it’s also important to set a budget to determine how much you can invest. A budget will help you to make sure you’re paying your bills and reduce costs elsewhere so that you can make the most of your money.

I’m a big fan of saving, but when it comes to saving vs investing, I would rather invest because I know I can make my money go further in an investment account rather than a savings account.


If you need to make a budget so that you can make the most of your money and then ultimately make more money then you might want to read our post about the most effective budgeting tips to grow your wealth.

Mistake #9 – Not having an emergency fund

Anything can happen in the stock market and since you are risking your money, it can be lost. That’s why it’s important to have an emergency budget so that if things go wrong then at least you have another source of savings to turn to so you don’t fall into a bad financial position in which you need to borrow money from the bank or loan sharks.


Start by saving a little into a savings account per month and make a commitment not to touch that money unless you fall into debt. I use the Plum app to create a number of different pots e.g emergency, holiday. I’ve then set up automatic deposits into those accounts every month. It gives me a decent interest rate and unlike some savings accounts, it’s not fixed so that I take that money out whenever I want it. I’m not endorsing Plum but I have linked to my referral so you can use it if you want.

Complimentary Reading: 5 Ways To Build Your Credit Score Now

Mistake #10 – Making panic decisions

The stock market does crash every so often which leads to a lot of selling. And even in other instances where the market hasn’t crashed but the stock price of some companies are falling due to other reasons usually causes a panic in new investors.

I remember my first crash experience, in which I was holding for the long term but as I saw my principal invest decrease in value I was scared of losing everything. Luckily I stuck to my investing strategy and held on for the long term and learned a secret I’ve shared with you in my other posts such as what to do when the market crashes. That secret is to remember that the market always recovers. So relax!

Do this instead

Keep your goal in mind. If, like mine, it’s to earn a passive income from dividends then keep calm and use this opportunity to buy more while the prices are low. If you want to earn quick profits in the short term then try re-balancing your portfolio by quickly cutting your losses and then investing those funds elsewhere.

Mistake #11 – Failing to rebalance their portfolio

If you choose to invest larger lump sums instead of in smaller regular investments, then its really important to re-balance your portfolio especially when the stocks you’ve invested in have fallen in price. Re-balancing your portfolio regularly can help you stay clear of losing your money and give you the opportunity to earn more if you buy stocks that are under-performing.


Review your portfolio every few months to see what direction its going in. If you need to make changes or adjustments then do so.

Mistake #12 – Only using robo-investors

Using a robo-investor means signing up for a program that trades for you based on your preferences. For example, if you have a pension with someone like PensionBee, you can choose to either save your money and leave it untouched or invest your money.

Platforms like this will invest on different risk levels. This is a good option if you’re not in control of your money such as with your pension – as you have access to it only after a certain age. However only using robo-investors is not investing. You can do so much more to grow your wealth by signing up for a trading platform.

Mistake #13 – Not taking into consideration trading fees

When trading there will inevitably be fees that you have to pay – every platform will have a different model so you need to choose the best one for you. Paying too much in fees will impact your returns.

Among the platforms I use, I like Trading212 because its very user friendly but it also has the lowest fees that I’ve found. You might want to use multiple platforms for different kinds of investments e.g. some platforms may not charge commissions or fees for certain investments.

Mistake #14 – Making the wrong kind of investments

I don’t mean stocks – I mean investing in products that you may not need such as stock or dividend trackers with companies like SimplyDividends or DividendMax. These are excellent products and I’ve used the trial versions so I can see the benefits they provide but if you don’t need them, then save you money and invest it instead.

When you’re ready and have been investing for some time and you feel a need for such products then you can think about buying them. But don’t jump into buying subscriptions for things you don’t need just because you’ve started investing. Growing your portfolio is the main thing you should focus on in your early investing years.

Mistake #15 – Not setting limits on orders

You can’t buy shares when the stock market is closed but you can set orders. When buying a whole share the mistake most new investors make is that they set buy orders for the number of shares that they want, not considering the price that they’re willing to pay. Depending on the trading platform, as soon as the market opens, those buy orders will be executed but maybe not immediately. Therefore you may buy shares at a higher price than when you saw them when you placed the buy order.

Setting limits solves this by setting a limit on how much you’re willing you pay per price of a share. This way you can keep track of all of your investments and only pay the price you believe is fair. This is also known as a stop-loss limit.

Stock Market mistakes

Mistake #16 – Investing more in stocks that are losing

Trying to reduce your average cost per share on stocks that are losers is a bad idea. Both new and experienced investors make the mistake of thinking they can recoup their money or lower their losses if they buy more of a stock that is losing its value.

If a stock is a bad one, then you made a mistake in your initial analysis. Thats ok. Everyone makes mistakes. The bigger mistake is to put more money into that stock. Cut your losses and get out because as I said above that if you’re going to fail, fail fast so you don’t make it worse.

Mistake #17 – Being greedy

Emotions can run high when investing in the stock market but emotions can lead to bad investment choices. If you see a stock rising in price and you’re looking to profit from the returns then make sure you base your decisions on facts rather than emotions. The best way to determine how a stock will perform is by learning how to read stock charts and identifying the trends.

Recommended Reading: How To Read Stock Charts For Beginners


Investing is a long term game so if you’re not making any of these mistakes now, the chances of committing them can increase the longer you invest. Therefore it’s better to know what the common mistakes are so that you can avoid them. Mistakes will happen but it’s important to act quickly so that you can rectify those mistakes.

I’ll leave you with the following four key points:

  • Keep these mistakes in mind when investing. The stock market is where you can either win or lose so give yourself the best chance to win.
  • You might make mistakes. There are a lot of them to be made so don’t worry. Just focus on building your wealth one step at a time.
  • This list is huge but it doesn’t cover all of the mistakes that can be made.
  • Give your investments some time. Growing wealth through investing in the stock market happens over years, not overnight.

Hopefully you liked what I had to share. If so, pay it forward by sharing it with others.

About Mazaher Muraj

An established software engineer with over 10 years of experience having worked in the medical, financial and telecommunications sector. Other than that I'm a regular person just like you. I started investing to make my money grow and reach my financial goals. I faced a lot of obstacles at the beginning of my journey because I had so many questions and didn't know where to start. I started this blog to help others in a similar position, to provide high-level and helpful content to make the complicated things about investing as simple as possible for everyone.
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