Investing successfully isn’t just about chasing the next big winner, although nice it rarely ends without tears. Successful investing is more about avoiding the mistakes that quietly erode your long-term returns.
From Newcastle’s booming property market to the ever-changing ASX landscape, Australian investors have plenty of opportunities and just as many traps. The key is taking a calm, strategic approach rather than following headlines or hype.
Let’s explore some of the most common investing mistakes and how you can sidestep them to build a portfolio that stands the test of time.
Chasing the “Hot” Shares
Every few years for as long as investment markets have been around, a new trend grips investors. Think the high tech stocks with no revenue in the dot-com bubble of the early 2000s, the social-media-fuelled AMC frenzy in 2020, or the lithium boom that hit Australian markets in 2022, great if you can time them! Chances are, you’re not that good.
It’s easy to feel like you’re missing out (fomo) when you see those stories all over your feed or hear about mates doubling their money overnight at the 5th birthday party your attending on a Saturday morning. But as history shows, what goes up fast often comes down even faster.
Jumping into trends without understanding the fundamentals is like trying to catch a wave without a surfboard- you might stay upright for a bit, but you’ll wipe out sooner or later.
👉 For context, see the ASX historical performance chart and ASIC’s guide to avoiding investment scams.
The takeaway: The real winners play the long game, not the hype cycle. Look long, play short.
Not Knowing Your “Why”
Before you invest a cent, get clear on what you’re investing for.
If your goal is to build wealth for retirement 20–30 years from now, you can afford to take more risk and invest for higher growth, likely you won’t need an income as naturally you’ll still be working. But if you’re already retired and relying on your investments for income, you’ll likely prioritise dividend yield and capital stability.
👉 Tools like the MoneySmart investor calculator can help model how different strategies fit your goals.
Knowing your “why” shapes every decision- from asset allocation to how you respond to market volatility.
Trying to Time the Market
Even professional investors get this wrong.
Timing the market means buying or selling based on where you think prices will go next. But as the legendary investor Peter Lynch famously said:
“Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”
Instead of trying to time the market, focus on time in the market. Letting compounding and consistency work in your favour.
The hard part about timing the market, is that you must be right twice. First on the sell, then on the purchase of the asset’s again. A skill that 90% of traders get consistently wrong. How many rich stock traders have you heard of?
Putting All Your Eggs in One Basket
Diversification might sound cliché, but it’s one of the most powerful principles in investing.
By spreading your investments across asset classes, sectors, and geographies, you reduce the impact of any one investment going wrong.
A well-diversified portfolio might include:
· Australian shares (e.g. ASX-listed blue chips)
· International shares (US, Asia, Europe)
· Property and REITs
· Bonds and cash equivalents
· Alternatives (private equity, infrastructure, commodities)
👉 The ASX Investor Study 2023 shows that diversification remains a key driver of portfolio performance for Australian investors.
What you’re trying to do with diversification is reduce the downside volatility. Spreading risk helps to smooth returns. By protecting the downside, you are less likely to freak out and panic sell (worse thing you can do) if you’re portfolio drops 20% in a day.
Understand that investing is all about the psychology of the individual investor. Investing is also a 0-sum game. There has to be a winner and there has to be a loser. Those who trade more often lose more of their gains, as cited by Berkeley professor Terry Odean in his landmark study. Odean also found that women outgained men by 1% each year as they traded on average 45% less often than man. However, ladies still lagged the dead as the most superior investors.
Ignoring Asset Allocation
Diversification tells you what to own and asset allocation tells you how much to own.
Your asset allocation is the split between defensive and growth assets has the biggest influence on your long-term results. However, gone of the days of the traditional 60-40 portfolio. This died after the GFC, when the fundamentals of liquidity changed with central bank intervention.
For example:
· Growth assets (shares, property) deliver higher potential returns but more volatility
· Defensive assets (cash, fixed interest) provide stability but lower returns. (But get’s printed out of thin air)
Regularly rebalance your portfolio to bring it back in line with your goals, especially after big market movements, seems like a logical thing to do. However, it’s likely to the detriment of your returns as naturally you are selling your winners and buying your losers!
Making Emotional Decisions
Markets are emotional and so are we.
During the COVID-19 pandemic, the ASX 200 fell by 35% between February and March 2020. By May 2021, it had recovered beyond its pre-pandemic peak. Investors who sold during the panic missed out on one of the strongest rebounds in history. Trust me, I had lots of phone calls during this time. You never want to be a forced seller! Especially in volatile times.
👉 See the RBA’s analysis of the Australian securities market during COVID-19 for full context.
A much better position to be in, is always having excess capital. This way, you never have to sell assets to fund your lifestyle in a challenging or volatile market. But more importantly it allows you to take advantage of generational opportunities when they present themselves. They always do, around every 10 years on average. Warren Buffet articulates this well through one of his most quoted remarks “Buy when there is blood in the streets”. As a general rule of them, I always like to have around 2 year’s worth of living expenses idle.
Final Thoughts: Strategy Beats Impulse
Avoiding investing mistakes isn’t about being perfect. It’s about being consistent, disciplined, and informed. Set the right strategy for you and your goals. Know your why and enjoy the journey!
If you’d like help reviewing your current portfolio or building an investment strategy aligned with your goals, our team at Tenex Wealth can help you structure your portfolio for growth and resilience.
Disclaimer: This information is general in nature and does not constitute personal financial advice. You should consider your own objectives, financial situation, and needs before making any investment decisions. Past performance is not a reliable indicator of future performance.