11 Mistakes to Avoid When Investing for the Long-Term

Learn from the mistakes of others to avoid making them yourself

Investing may seem simple, but mistakes can be made all the time. I have made most of them myself. Here are 11 mistakes that can really reduce your performance.

Some may be controversial, but keep what makes the most sense to you.

1. Buying and selling too much

Buying and selling too much, either in an attempt to time the market or to catch all the trends, is often a factor that results in performance loss and is relatively costly in terms of fees.

2. Anticipating

Sometimes anticipation is a good thing, but in some cases it can be dramatic. Anticipating a future trend reversal can lead to buying or selling too early therefore destroying a lot of value.

3. Looking at daily charts

Looking at the daily charts or your portfolio too often can lead to emotions and irrelevant signals. However, it is useful to follow the news of the companies in your portfolio.

4. Buying only trendy stocks

Trendy stocks are tempting for two reasons: their often higher price makes them appear more interesting to the human brain, and because bullish narratives abound. While this strategy can work, it is often highly value destructive (Example: software with a PS of over 20 at the end of 2021, COVID stocks like peloton, …)

5. Averaging down

Buying dips is good as long as your investment thesis holds. When it doesn’t anymore, buying to average down often leads to more loss. To avoid that, I try to wait before buying when there is a negative trend on a stock and wait for monthly supports. Also, when I add to a “loser” - again if my investment thesis holds - I also add to a “winner”.

6. Buying all the dips

Buying all the dips will rarely helps, especially in bear markets as the dips keep dipping! Wait before your buys in you are long-term oriented and try to have a focus on the consistency of your portfolio.

7. Wanting the perfect result

It is always easy to say what was the best thing to do and a lot of people will explain that you didn’t have the best strategy - and sometimes they will say that their strategy was better. I see 2 problems here: there is often a survivor biais and it can change your mindset. You may want to aim for the perfect result. This may lead in bad decisions.

8. Listening to the noice

Focusing on the fundamentals of a company is important. The noice around can be very disturbing. Earnings, metrics, market and market share analysis often lead to better decisions that all the noice you can hear: analysts, social networks, news and short-term stock prices.

9. Being obsessed with value

Focusing only on value often leads to buying companies in bad shapes. Value is good but cheap stocks not necessarily. You have to find great company at a reasonable price and not bad (or worsening) companies at a great price.

10. Being obsessed with growth

Same for growth. If you focus 100% on growth and not looking at other metrics you may experience a lot of issues in your investing journey: buying too expensive stocks, not reliable enough or too trendy.

11. Not knowing the companies you invest in

The example of the analyst recommending Upstart as a buy but not even knowing the company's business has become well known. Being well aware of a business model is a necessary condition to invest and have results. This is also a good knowledge in your stock that will allow to know if you can buy more when the price drops or if this is not reasonable. And this is why I write deep dives on companies (examples: L'Oreal, Fastenal or Arista)