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Newbies checking a map

Common Investing Errors Newbies Make

Are you ready to pave your path in the investing world? Go you! But before you head off on your epic adventure, make sure that you don't fall prey to a big mistake by taking note of these common investing errors newbies make. We don't say this to scare you off of investing; we say this so that you may learn from the mistakes of others…and hopefully not repeat them!

Note: This article contains affiliate links. This means that if you purchase a product or sign up for a company through one of our links, Thrive Oak will make a small commission (at no extra cost to you).

Newbies checking a map

Investing Before You’re Ready

While we are obvious advocates for starting your investment journey early, there is such a thing as “too early.” This would be if you're unbalanced in your monthly expenses, don’t have an emergency fund set up yet, or if you are paying off high-interest debt that exceeds what you could possibly earn from growing investments. Mistakes go both ways. There is also the mistake of waiting too long and not giving your investments sufficient time to grow before retirement, so there is certainly a balance to walk.

How to Avoid This Mistake:

Before you jump headfirst into investing, evaluate your current money situation. Balance your monthly expenses so you have more money coming in than going out, set up an emergency fund, and pay off high-interest debt. After you do that, you will be ready! Don’t let yourself get psyched out by what you read in the following sections, but use the guidance to make you stronger. You can do this!

Not Evaluating Your Risk Mindset

When you begin investing with an investment manager or using an algorithm, you will usually fill out a survey. This survey will ask you a bunch of questions to figure out your risk tolerance. This is partly based on age, job, and retirement goals, but it is also based on your personal mindset. You will fall somewhere on the scale of these three categories: conservative, moderate, or aggressive.

A common mistake for newbies is that they jump right in, either not thinking about this or deciding to wait until later before addressing it. This could be an issue, for example, because markets go up and they go down. Most everyone loves when they go up a ton, but not everyone can handle huge downturns without feeling serious anxiety. Generally speaking, greater risk can lead to greater rewards, but it’s not advised to take large risks if you can’t stomach large short-term swings. It’s important to consider your own personal risk tolerance to ensure that your portfolio risk level is appropriate for you.

How to Avoid This Mistake:

Before you take on investing, especially if you are flying solo, you should take one of these surveys and use that as a guide to your investment strategy. It takes about five minutes to fill out, and it will help you determine your investment mindset.

Over-Investing

We know that investing can be very exciting, and many newbies get slightly obsessed as they are starting out, but it’s important no to go to big too soon. Many newbies drop thousands of dollars, completely gung-ho. While we admire that spirit, it is not a wise plan of action before you build an initial foundation of experience.

You can compare it to swimming. When you learn how to swim as a little kid, you start in the shallow end, where your feet can touch, and with water wings to keep your head above water. Eventually, you learn how to swim and make it to the deep end. You don’t just jump straight into the deep end (even if that’s how Grandpa said he learned how to swim).

How to Avoid This Mistake:

Investing is like learning to swim, it is something that takes time and should take time. Newbies don’t just go from water wings to Olympic swimmer. Start slowly by investing just $100 and see how it goes. Learn what works and what doesn’t, then build up from there.

In addition, once you get more experience, you want to make sure NOT to invest too much of your assets just in case something goes wrong. You must find the proper balance for you; having guidance in this regard could be helpful.

Being Lazy with Research

Newbies being Lazy with Research

People dedicate their lives to understanding and working within the financial market, but for some reason, newbies think that they know more than they do. Many newbies know very little about how investing works, information about the companies that they are investing in, and an overall goal for what they are trying to accomplish. This can lead to poor investment strategy, loss of profits, and feeling discouraged.

How to Avoid This Mistake:

That is simple! Do your research! Before investing in a company or an idea, take some time to learn about it. We aren’t asking you to dedicate weeks to studying one company, but you should learn about the company’s goals, where they are headed, how they have performed so far, and what market analysts are estimating their success to look like. Similarly, if you’re looking to buy into investments other than just stocks (such as mutual funds or ETFs), it’s also smart to do a bit of homework ahead of time. If you’re not sure where to start, check out and our list of investing apps. Most of these services also have investing tools that are simple to pick up and use. (P.S. good job on being here at Thrive Oak, you are on the right track! Learn more by reading our article on the Investment Lessons Learned by Sucessful Investors.)

All in One Basket

You know the phrase “don’t put all of your eggs in one basket,” don’t you? The same concept applies to our investments as well. When just starting out, newbies generally only do one thing, but that isn't the best route. If we were to put all of our money is say just one stock, and that stock was to fail, goodbye money!

How to Avoid This Mistake:

The best way to avoid this is by putting your eggs in a bunch of different baskets. This is why all investors, new and experienced, must diversify their money.

Trading Quickly

Warren Buffett once said, “You can't produce a baby in one month by getting nine women pregnant.” Another common mistake for newbies is that they have the urge to trade quickly. They are thinking “get rich quick” instead of building wealth over a lifetime. It may be enticing to trade each and every day, but that has a low percentage of success.

How to Avoid This Mistake:

The most successful investors have a “buy and hold” mentality. They are thinking long-term, decades down the road instead of tomorrow. The best way for novice investors to avoid this mistake is to focus on their goals for the future. Are you saving up for a big event, an early retirement, or merely building wealth? Have a plan and stick to it!

Believing the Hype

This mistake links to the one above. It is when you hear from friends, social media, or whatever source that some type of investment is hot and you should invest. You are new to the game, so you should believe that some Youtuber or your sister's boyfriend's brother is all-knowing about the market, right? Therefore, you run to buy it, right? NO!

How to Avoid This Mistake:

Don’t be a sheep! What we mean is, be skeptical about the next “hot” investment. While the hype may seem like a good idea at the moment, it doesn’t mean that it is a good investment. It goes back to that “doing your research” thing we talked about in the last section. Do your due diligence and form your own informed opinion about what’s worth investing in.

Attempting to Time the Market

No one can accurately predict when the market will go up or when it will go down. Let me repeat that, NO ONE can accurately predict the timing of the market. To be candid, if you try, you will likely lose more money than you gain. It’s not just you, this fact is true for everyone no matter how experienced or knowledgeable. There are experts from around the world who work hard to follow the news and who crunch huge amounts of data to try and get an advantage. As a whole, these folks do worse than investors who buy and hold investments for the long run. Timing the market “is a waste of time,” so don't bother, and certainly don’t lose sleep over it.

How to Avoid This Mistake:

Proper investing is about time in the market, not timing the market. By consistently investing over time and holding assets without consistent buying or selling, the knowledge that the market will steadily rise over time (even if it drops for a bit temporarily), is what will make you successful. What that means is, just invest at a regular rate, no matter what the market is doing, instead of waiting to catch that big break that will likely never come.

Investing with Emotion                

Investing with emotion is a big mistake for many investors. They are thinking with their hearts and impulses instead of their heads. This can manifest in many different ways like:

Emotional Newbies
  • Investing in a company you love, even if their statistics show differently.
  • Waiting too long to sell a failing stock with the hope that it will bounce back.
  • Overbuying when times are good.
  • Pulling out when the market falls.

That last one is a doozy, so let’s expand for a moment.

Selling Out Due to Fear:

If you think back to the first week of March 2020, the market fell straight out of the sky, and the number of new U.S. coronavirus cases was still accelerating like mad. Any reasonable investor could confidently assume that the markets would only tumble further. The seemingly obvious action to take would have been to sell a bunch of stock before things fell another (seemingly certain) 30+%.

Instead, looking at the market activity two weeks later, that seemingly wise decision would have turned out to be a HUGE mistake. We understand that when the stock market takes an epic nosedive like the Coronavirus caused, it can be scary, but selling out due to fear won't help you. The smart action would be to buy more after stocks tank, not to sell-off.

Dow Jones INDU Average

How to Avoid This Mistake:

Invest with your head, not your heart. Use numbers, facts, and statistics to guide you in your investment strategy instead of “gut feelings.” While “gut feelings” are wonderful for many things, investment strategy is not one of them. Trust the numbers, they are going to be your best friend.

Buying High and Selling Low

This topic is really just bringing together the lessons of the last few sections. Buying on emotion and following hype can cause you to want to buy when times have been consistently good and sell when markets tank. Don’t do it… in fact, do the opposite!

How to Avoid This Mistake:

Buy low and sell high.  It’s generally the best time to buy when markets have just tanked (like what recently happened with the Coronavirus). I know, I know. It feels super icky to buy when the markets have sunk, but it means that you have much more upside to ride up! Just remember- don’t waste your time trying to time the market by buying at the absolute bottom. If you have money earmarked for investing that you haven’t yet invested, buy extra when the markets are especially low to get everything for a relative bargain.

Overpaying Commissions

While many newbies see only dollar signs when they sell a successful stock, they tend to forget about commission fees. You want to aim for less than $7 per trade, optimally 2% or less. Even then, if you are selling shares for $10 for a $7…that doesn’t add up

How to Avoid This Mistake:

Be well aware of your brokerage’s fees and commissions before you actively invest or trade with them. OR you could avoid fees altogether as you get started by using one (or multiple) of the many free trading investment apps that won't force you to pay through the nose. 

P.S. Don’t forget about Uncle Sam! You have to pay taxes on everything you sell, so make sure to factor that in too! If you are curious about the difference between Pre-tax and After-tax, read about it HERE.

Not Keeping an Eye on Your Investments

Yay! You invested, now it is time to go sit back on the couch and watch re-runs on Netflix. Right? Uh no! A common mistake among newbies is that they get the ball rolling, and then forget to watch where it goes. Investing is not something you can just forget about.

How to Avoid This Mistake:

Most analysts recommend checking your investment portfolio once a quarter, just to make sure that everything is running smoothly. If you happen to see a dip, don’t fret too much because that will happen. While doing your quarterly check you should review the progress of your investments, be aware of losses and when to sell, evaluate your performance and adjust accordingly, as well as re-balance your portfolio when it gets out of line of your goals. When it comes to re-balancing your portfolio, it is recommended that you do this about once a year (twice max). Keeping an eye on your investments doesn’t mean that you need to watch it every minute of the day, that would be WAY too much work!

Getting Discouraged

Remember that analogy about swimming from earlier? Just like swimming, investing takes effort, dedication, and the ability to try again even when you fail. Even Olympic swimmers once doggie-paddled across the shallow end. The likelihood of you being an absolute pro immediately with no losses is impossible, and newbies may just want to give up.

How to Avoid This Mistake:

Don’t give up! Over time, you will learn how to accept losses, you will become better at adjusting your strategy, and in the long run, you will be successful as long as you keep learning and keep trying. We believe in you, now you just need to believe in yourself.

Newbies learning to invest

Don't Be Afraid Because You're a Newbie

We understand that what you just read may be a bit scary, but we know that you can do it! If you are reading this post, it means that you are already one step ahead of the average novice investor. Go you! Now, we suggest you take a look at the different Types of Investing Methods, so that you can start forming a plan of action!