This is going to be quite a cathartic blog for me because I have been guilty in the past of every single one of these mistakes. In this blog, 8 investing mistakes to avoid, I’ll discuss eight common mistakes people, even the guru’s, make and how to avoid them.

8 investing mistakes to avoid – Not investing in the first place

that it was the realm of the sharp-shooting, pin-stripped suite wearing, Harvard educated big-wig and little old me had no chance. Even more, the only way to access the stock market was to open a high street broker account which was terrifying. To have to phone a broker (and they are the font of all knowledge right?) and ask him (they were all him’s back then) to buy shares on my behalf and then have to listen to his put-downs as he convinces me where I was going wrong filled me with dread. A different world to be left to the professionals.

Of course, all this changed thanks to the internet. On-line broker accounts are opened in five minutes flat (as I explained in my blog how-to-buy-shares-stock-market-investing-for-beginners), the buying and selling process is automatic and the support network is vast.

Once I had read ‘One up on Wall Street‘ by Peter Lynch and I found out that the government allowed you to grow wealth in a tax free wrapper I was hooked. Today, I’m convinced that everyone should have a stock market portfolio, small or large. By using simple strategies and taking a disciplined approach anyone can make good returns in the stock market. The hardest part is taking the leap.

8 investing mistakes to avoid – Not putting stocks into categories

My 14 year journey so far hasn’t been plain sailing if I’m honest. In fact I almost gave up at one point. My winners were being offset by my losers and I couldn’t seem to get any tailwind. In 2016 I set off on a 1 year travel adventure and left my portfolio to do whatever it was going to do. I don’t know why I picked up Peter Lynch’s book but it was the inspiration that helped me understand why things were’t going to plan.

The one piece of advice I gleaned was that I was approaching my investing all wrong. I was buying companies ( based on a whole heap of books I had read over the years ) and wanting them all to do one thing. Go stellar without understanding what they were capable of. For instance, I would buy British American Tobacco and expect the share price to rise by 20% and when it didn’t and in fact went down I would get frustrated and sell. What I was unable to appreciate was that British American Tobacco is a big fat juicy cash cow of a company and if you expect the share price to rise hugely you are going to be disappointed. However, if you buy BATS for its dividend you are going to be very happy because over the years BATS has produced a steady high yielding dividend and has been a darling of pension funds worldwide for that reason alone.

By using strategies and putting companies into categories my returns have changed dramatically over the last 7 years. Three strategies I use are the dividend, growth and turnaround strategies and each company I buy fits into one of them. Click on the links to read/re-read the blogs.

Just a little bit of discipline et voilà, I turned a corner.

8 investing mistakes to avoid – Beating myself up

When I say the word EGO what does that conjure up for you. The typical testosterone filled, over confident, popular alpha male perhaps? That’s the stereotype for sure. But as I mentioned in my blog on psychology, EGO has a dual purpose. Sure there’s a lot of people that exert EGO in a confident manner but EGO also protects us from harmful repercussions from mistakes by filling our thoughts with phrases such as ‘I can’t do that because, that’s too difficult for me, what if I make a mistake or little old me I’m just a’. In a sense it thinks it’s doing us a favour but in fact it’s the one single element of human nature that holds us back.

8 investing mistakes to avoid – Looking for too many Stocks

In my last Blog, buying quality , I championed the idea that buying quality companies will reap better yields over time than buying less quality companies. This is not my idea by the way. Stockopedia in its quality rank identifies statistically that according to their own research this approach to investing outperforms other types of investment over time. Peter Lynch talks about buying companies that has great products, protected from cheap imports, has no debt, products that people are going to need years down the line whose share price is selling at a discount to actual value. These are all hallmarks of quality companies. Warren Buffett goes one further.

8 investing mistakes to avoid – Over Confidence

If we go back to the beginning of this blog, my first mistake was not investing in the first place. Thankfully I took the plunge and it seems perfectly reasonable whilst cutting your teeth to start small and build from there. That’s exactly what I did. I worked extra shifts and my first investment was £1500 and I played safe and bought Tesco shares. Three months later I had made 5.16%. Boy, does that make you feel good. My first profit on my first investment. I spent the next couple of years tentatively poking around making a few quid here and a few quid there, reading and expanding my knowledge as I went.

As my confidence grew so did my investment amounts. From sums of around £1500 they grew to £5,000 to £10.000 to £20,000. At one point back in 2015 I had amassed £70, 000 in Tesco’s. I didn’t need to do any research, by the way, because Warren Buffett had just bought £350 million worth of shares in Tesco and if he’s buying I didn’t need to do any research. Warren Buffett, by his own admission, has made 8 howling clangers in his long illustrious career. Unfortunately for me, Tesco was one of them. As the accounting irregularities flooded out into the newsroom I saw my investment drop 50%. OUCH. I did manage to breakeven on 75% over the few years later but still my confidence had the better of me. ( Tesco’s is back to what I paid for the but it took 8 years to do so). Keep an eye on that confidence as you grow and stick to your due diligence.

8 investing mistakes to avoid – Getting too excited

The problem with successful investing is that it’s boring. There’s no action. You do your research, invest your money and wait for the company to grow ( growth), turn themselves around ( Turnaround ) or wait bi-annually for the dividend to hit your account (dividend). All three strategies take time to evolve and in the meantime you just have to be patient. If you look at the weekly share price you might see a 1-2% rise or fall but that’s it.

I know it’s a long time ago now but back in 2020 something was let out of the bag that was going to kill us all. A pandemic so virulent they made us all stay at home. I don’t know how anyone else filled their time but I took to Youtube to get some more investing ideas. My portfolio was boring, my life was boring, everything was just boring. Lo and behold I found the answer. The AIM ( alternative index market) or Penny Stocks to you and me. Share prices were jumping 20-40 percent a day. I had found my action. Never mind my slow growers, I want in. I started selling off my portfolio and ploughed straight in. BIG MISTAKE…. HUGE..

The AIM index was setup to help startup companies (who didn’t qualify to enter the London Stock exchange fully) acquire necessary capital to get their ‘Rocket’ into orbit. It is less regulated than the proper stock market and as such carries more risk. In my blog The Stock market – A brief history, I said that the stock market was setup to prevent investors from daylight robbery so it was our friend not our enemy and now I’ve just ploughed my hard earned gains into a group of companies that are not as regulated as they should be. D’OH.

There is a very high percentage of companies in the AIM index that don’t make it so it’s a bit of a lottery. Err hem, I have to confess to making a few losses during that time but rest assured I have slapped my own wrist here, taken it on the chin never to repeat my folly.

8 investing mistakes to avoid – Selling my winners

Selling your winners and holding your losers is like cutting your flowers and watering your weeds

Peter Lynch

The point is simple. Your winners will keep on winning and your losers will keep on losing so selling your winners is counter productive to a growing portfolio. Don’t sell your winners.

8 investing mistakes to avoid – Not going big

Whilst not entirely a mistake it is something that holds me back and is very frustrating. I’m getting there but still not quite cracked it yet. Let me explain. You’ve logged on to Stockopedia , created a screen, found a gem of a company and invested £10,000. Boom, it’s a winner and doubles your money. You’ve made £10,000. Congrats. But something’s not right. What’s niggling you? You left £40,000 in cash in your portfolio. Had you invested £50,000 you’d have made £50,000. The decision was to invest in that company. It’s the same decision, the same company whether you invested £10k or £50K. The decision to invest in that company is the risk, not the amount you invest. So the niggle is that you made a good decision and now you’re beating yourself up a little.

Investing style is a personal choice and I think the lesson here is being comfortable in your own skin is far better than pushing yourself to the limit. Let’s face it, we all want to sleep soundly at night.

8 investing mistakes to avoid – Conclusion

Let me ask you a question. If Stockopedia has all the information required to make informed investing decisions, why can’t you just read the info and become millionaires? There’s obviously something else at play. But what? Maybe the famous quote from the grandfather of investing can help us out.

The Investor’s chief problem – even his worst enemy – is likely to be himself

Ben Graham

Investing, it would seem, is a journey into self. How often have we witnessed kids jumping straight in and learning as they go. They don’t fear failure. It’s only as we grow older do we become more self conscious, more aware of consequences.

We are a funny bunch, us humans. Full of strengths, weaknesses, pressure points, foibles all wrapped up in skin and bone; each one us made differently. Investing is a personal journey and the good news is that you can tailor your investing strategy to whatever suits your personality. One thing is for sure though, making mistakes is part of the journey and it’s true what they say

If you’re not making mistakes, you’re not achieving anything. It’s good to learn from your mistakes but infinitely better to learn from someone else’s. Learn from mine.

If you want to learn how Stockopedia can help you in your investing decisions click on the image below using code MD25 for a 25% discount off your 1st years subscription. It’s worth it.