Written by Alex Seleznev, MBA, CFP®, CFA | Mar 6, 2024
1.) Expecting too much
Investor annual return expectations: 15.6%
Financial professional return expectations: 7.0%
2.) No investment goals
Only 59.0% of investors say long-term growth is their top goal
3.) Not diversifying
Only 21.4% of U.S. stocks beat the market over the 20 years from 1927 to 2020.
4.) Not doing due diligence
Usually applies to do-it-yourself investors. “Gut feeling” is not an investment strategy.
5.) Working with the wrong advisor
“Jacks of all trades” and “specialists” are likely to deliver different results for specific needs such as retirement planning
6.) Focusing on the short term
50% higher transaction fees were paid by investors with a short-term view
7.) Buying high and selling low
2.0% investors’ average annual loss in returns due to buying high and selling low
8.) Too much trading
6.5% average underperformance by the most active traders vs the U.S. stock market
9.) Paying too much in fees
The average fee for ETFs and mutual funds in 2022: 0.40%
10.) Not reviewing regularly
Review your portfolio at least annually to make sure whether you are on track or need rebalancing
11.) Misunderstanding risk
Your risk profile tends to fluctuate depending on your cash needs, market conditions and personal preferences
12.) Not knowing your performance
This is more common than you think! Most investors are not aware of their actual account performance
13.) Reacting to the media
Negative news can trigger fear and irrational decisions
14.) Investing with emotions
3.0% investors’ average loss in returns due to emotionally-driven investment decisions
15.) Forgetting about inflation
Value of $100 after 1 year of 4% inflation: $96
Value of $100 after 20 years of 4% inflation: $44
16.) Trying to time the market
Market timing is extremely hard, to say the least
17.) Chasing yield
High yield investments often come with increased risks
Source: CFP Board, Professional Experience