When reviewing your investment strategy, it is important to avoid these common investment mistakes.
Expecting Too Much or Using Someone Else’s Expectations
Investing for the long term involves creating a well-diversified portfolio designed to provide you with the appropriate level of risk for the investment return you need under a variety of market scenarios. Even after designing the right portfolio, however, no one can predict or control how the market actually performs. Determining a reasonable rate of return requires an understanding of your goals, your current asset allocation, your contributions and your time horizon to retirement.
Lacking Clear Investment Goals
“If you don’t know where you are going, you will probably end up somewhere else.” This proverb certainly holds true with investing. Everything from the investment plan to the portfolio design, and the individual assets you select work best when configured with your retirement objectives in mind. Rather than focus on the latest investment fad or maximizing short-term investment return, it is wiser to design an investment portfolio that has a high probability of achieving your long-term investment objectives. Balancing your need for growth with an appropriate level of risk is paramount.
Failing to Diversify Enough
One of the most important ways to build a portfolio that has the potential to provide appropriate levels of risk and return in various market scenarios is through diversification. Investors sometimes think they can maximize returns by taking a large investment exposure in one market sector or, worse yet, one fund or asset class. The best performing market sectors are constantly changing; when the market moves against a concentrated position, it can be disastrous. To find the right balance in your portfolio, set up a financial consultation with the JRB.
Focusing on the Wrong Kind of Performance or Chasing High Returns
If you are a long-term investor, speculating on performance in the short term can be a recipe for disaster. Chasing recent performance can be tempting. Why wouldn’t you try to maximize your investment returns? First, past returns are no indication of future performance and second, higher yields often come with additional risk. If you find yourself looking short term, refocus. Step back and look at the whole picture; don’t get distracted.
Buying High, Selling Low, and Trading Too Often
The fundamental principle of investing is to buy low and sell high, so why do so many investors do the opposite? In many cases, investors buy high in an attempt to maximize short-term returns. This can lead to investing in the latest craze or fad or investing in the assets or investment strategies that were effective in the near past. The opposite is also true. When markets fall, our instinct is to sell. This can lock in losses and make it harder to participate in a recovery. When investing, patience is a virtue. It can take time to gain the ultimate benefits of an investment and asset allocation strategy. Continued modification of investment tactics and portfolio composition can result in taking unanticipated and uncompensated risks. Use the impulse to reconfigure your investment portfolio as a prompt to learn more about the assets you hold instead of as a push to trade.
Not Reviewing Investments Regularly
If you are invested in a diversified portfolio, there is an excellent chance that some of your investments will go up while others go down. As time passes, the portfolio you built with careful planning will start to look quite different. Don’t allow yourself to get too far off track! Check your asset allocation (at least once a year) to make sure that your investments still make sense for your situation and, importantly, that your portfolio doesn’t need rebalancing. Your JRB online account allows you to schedule automatic rebalancing quarterly, semi-annually, or annually. Contact us at 888-JRB-FREE (572-3733) to set up this feature.
Taking Too Much, Too Little, or the Wrong Risk
Investing involves taking some level of risk in exchange for potential reward. Taking too much risk can lead to large variations in investment performance that may be outside your comfort zone. Taking too little risk can result in returns too low to achieve your financial goals. Make sure that you know your financial and emotional ability to take risks and recognize the investment risks you may need to take in order to meet your long-term financial goals.
Trying to Be a Market Timing Genius
Market timing is next to impossible, even for seasoned professionals. For people who are not experts, trying to make a well-timed call can be their undoing. Even a day can make a huge difference. An investor that was out of the market during the top 10 trading days for the S&P 500 Index from 2004 to 2023 would have achieved a 5.6% annualized return instead of 9.8% by staying invested. This difference suggests that investors are better off contributing consistently to their investment portfolio rather than trying to trade in and out in an attempt to time the market.
Letting Emotions Get in the Way
Investing brings up emotional issues around money and your future that can impede decision making. How can you balance the day-to-day cost of living with saving what you need for the vibrant, independent, fulfilling retirement you want? What do you want to happen with your assets after you die? Don’t let the immensity of these questions get in the way. The JRB can help you review these questions, understand your retirement plan options, and consider whether your current savings and investment approach remain aligned with your goals.
Forgetting About Inflation
Most investors focus on nominal returns instead of real returns. Understanding your real returns requires looking at and comparing performance after fees and inflation. Even if the economy is not in an inflationary period, some costs will still rise! One way to mitigate the impact of higher prices is to invest in asset classes that are likely to increase in value faster than inflation. The JRB’s model asset allocation portfolios illustrate that even older investors may need some equity exposure to help address inflation and long-term growth needs. For example, the models for participants ages 72 and over include approximately 25% to 42% in equities, depending on risk profile. Over time, it is important to consider not only nominal returns, but also returns after inflation and fees.
Neglecting to Start or Continue
Many people fail to begin an investment program because they lack basic knowledge of where or how to start. Others may feel that they cannot contribute enough to their retirement account to make a difference. Don’t defeat yourself! The JRB is alongside you every step of the way.
The fundamentals of long-term retirement investing do not need to be overly complex. Consistent saving, diversification, appropriate risk-taking, periodic review, and discipline are important principles for many retirement investors. We’ve just reviewed 11 of the most common mistakes retirement investors are likely to make.
You are not alone in your investment journey! The JRB walks with you. Call us at 888-JRB-FREE (572-3733) or email staff@jrbcj.org.
This information is for general purposes only and does not constitute legal, tax, or investment advice.
June 2026