No one is immune from investing mistakes, as there isn’t much we can do to control the environment in which we invest. But there is plenty we can control by focusing on specific goals, identifying what it will take to meet them and forming and following a plan. 

Below, we outline a few common mistakes we see investors making today. 

Cashing out when markets get volatile

Volatility is a feature of investing, not a bug. The advice to “stay invested” when the going gets tough might be considered a reductive cliché, but it’s not. Diversifying your portfolio with the addition of core bonds could help cushion against equity-market volatility and smooth out the ride.

Trying to time the market 

In a perfect world, investors would always buy at the low and sell at the high, consistently maximizing returns and minimizing their regrets. Maybe you think you can time the market better than the average investor, and maybe you’re right. But consider the risks.

Chasing headlines instead of sticking to the plan

In 2021, “meme stock” madness minted millionaires seemingly overnight. Fear of missing out drove troves of investors into stocks as they rocketed higher, and many of them took losses when the stocks crashed in the subsequent weeks. More recently, many investors feared a recession in 2023 and hid out in the safety of cash. Those who did missed out on broad global equity gains. Humans have a knack for fixating on near-term dynamics that might prompt emotional decisions that ultimately derail their longer-term goals. Recognizing our tendency to chase headlines is the first step in avoiding that mistake. 

Humans have a knack for fixating on near-term dynamics that might prompt emotional decisions that ultimately derail their longer-term goals. Recognizing our tendency to chase headlines is the first step in avoiding that mistake.

Taking risks that don’t suit their goals

When it comes to your money, what does “risk” mean to you?

It might bring to mind geopolitical conflicts, bankruptcies, supply chain snarls or asset bubbles, and the market selloffs they can cause. But do you also think of risks such as outliving your money, losing purchasing power to inflation or not having enough liquidity on hand to address an unforeseen circumstance? By engaging in a comprehensive planning process – dividing your wealth into sleeves with specific purposes, from day-to-day spending to leaving a long-term legacy, you can make better choices about the risk tradeoffs you are willing to take to achieve your financial goals.

Rick Barragan is the Managing Director, Los Angeles Market Manager, for
J.P. Morgan Private Bank

[email protected] | (310) 860-3658

Source: J.P. Morgan Private Bank Insights, March 7, 2024. “The five most popular investing mistakes of 2024” by Elyse Ausenbaugh, Global Investment Strategist, J.P. Morgan Private Bank.