Common Investment Mistakes

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( — August 24, 2017) Syosset, New York — 

Making investment mistakes can be costly and should be avoided, if possible. Faced with a multitude of investment choices, it’s easy to become overwhelmed and fall into poor decisions. Workers and retirees today have to be responsibile for their own retirement and savings and making investment mistakes can have serious consequences.  

This means that there is an increased need for economic know-how. But according to studies, many households are unfamiliar with even the most basic economic concepts required for making sensible savings or investment decisions. Of the mistakes made by investors, some are made over and over again and will likely be repeated for years to come. You can significantly boost your chances of investment success by becoming aware of these typical errors and taking steps to avoid them.

Here are some “investment sins” that should be avoided:

Not investing in financial education 

A recent report from the FINRA Investor Education Foundation states that two out of three U.S. adults “lack financial literacy” and that only 37% of Americans could pass a basic economic/financial knowledge test. A lack of understanding of basic financial principles can lead to serious errors in investment. 

For more on Financial Literacy – see related articles in our newsroom


If you don’t know your destination, how can you be expected to reach it? Investing without a plan is tantamount to throwing money against a wall and hoping that it will come back to you with profitable returns. 

Never invest on “hot tips,” rumors, conjecture, or other parlor tricks. None of these approaches, despite their popularity in the gambling get-rich-quick mindset of some investors, actually qualifies as a well thought out and intelligent investment plan. 

Consult with an expert advisor, and formulate a plan that aligns with your personal and financial goals. Only careful planning and strategizing your investments with an advisor who takes into account your goals and financial landscape can help yield positive results. 


Diversification is an excellent risk management tool but only when used intelligently. Allocating to different asset classes is the initial layer of diversification. You then need to diversify within each asset class. In U.S. stocks, this means exposure to large-, mid- and small-cap stocks.

When diversifying a stock portfolio, you may want to consider non-related markets like gold, real estate, bonds, commodities, and other assets that exhibit low or opposing risk profiles.

Timing is everything 

The past is not always the best measure of what is to come, especially in a volatile market where speculators can barely predict what will happen tomorrow, let alone what might happen over the course of a coming year. 

If you are saving for retirement in 30 years, what the stock market does in the short term may not be your biggest concern. Even if you are just entering retirement at age 70, your life expectancy is likely 15 to 20 years. If you hope to leave some assets to your heirs, then your time frame is even longer. 

Of course, if you are saving for your daughter’s college education, and she’s a junior in high school, then your window is relatively short, and your asset allocation should reflect that. Most investors are too focused on the short term.

The investment advice you receive about long-term probabilities and average returns may have little or no relevance to the actual results you get. Don’t make the mistake of basing your entire investment plan on historical average returns. 



Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances. Member FINRA & SIPC

About David Lerner Associates

Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY.

David Lerner Associates

477 Jericho Turnpike
Syosset, New York 11791
United States
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