The biggest investment mistake people make may be not investing in the first place. While simply putting money in the market is a positive first step, there are many ways to reduce the effectiveness of that investment, such as investing in assets that may not align with your needs or relying on sources that may not be appropriate for your situation. To help get your investments off on the right foot, consider five investment mistakes to avoid.

Getting trading and investing confused

Those internet ads for day traders can be appealing and may make it look easy to make money in the stock market. However, many individuals may find that their needs are better aligned with long-term investing rather than short-term trading.

Investing generally involves purchasing assets for the long term (often years or decades), while trading typically refers to shorter-term activity where securities are bought and sold over days, weeks, or sometimes hours. Trading can involve higher costs and risks, and results may vary significantly depending on market conditions and timing. Long-term investing may offer different risk and return characteristics over time.

Expecting target-date funds to do all the work

Target-date funds shift the balance of investments from growth-oriented assets to more conservative investments as a target date approaches. Like robo-advisors, they can provide a more automated, “set-it-and-monitor-it” approach to investing.  While it can be appropriate to hold some exposure to these funds, they are generally designed for a broad range of investors and may not fully reflect your individual circumstances. Fees and investment approaches can also vary. It is important to evaluate how much exposure to these funds makes sense for your overall financial strategy rather than relying on them exclusively for convenience.

Not understanding diversification

Diversification is a widely recognized principle of investing. To help manage risk, investors may consider spreading investments rather than concentrating heavily in a single sector or asset type. There are several ways to diversify, including by industry, geography, and asset class. While diversification does not eliminate risk, it may help reduce the impact of volatility in any one area. Simple approaches, such as investing in index funds or including international exposure, can help establish a foundation before exploring more complex strategies.

Taking investment advice from friends and family

Your friends and family may share investment ideas with good intentions. However, their perspectives may not take into account your individual financial goals, time horizon, or risk tolerance. To help protect and grow your assets, it may be beneficial to evaluate information carefully and consider guidance from qualified financial professionals when making investment decisions. 

Hiring a financial advisor who isn't a fiduciary

Think your financial advisor is working for you? Financial professionals may operate under different standards. Fiduciary advisors are required to act in the best interests of their clients when providing advice. Understanding whether your advisor is acting as a fiduciary, as well as how they are compensated, can help you make more informed decisions about the guidance you receive.

Review your investment portfolio for these common mistakes and consider making adjustments if certain investments may not align with your financial goals. Moving forward, applying these lessons may help support more informed investment habits over time.