Most investment mistakes aren’t caused by picking the wrong fund. They’re caused by predictable behaviours that quietly erode returns over time. Here are five of the most common, and how to avoid them.

1. Trying to time the market

Waiting for the “right moment” to invest, or trying to sell before a downturn and buy back in at the bottom, sounds sensible but rarely works in practice, even for professional investors. Missing just a handful of the market’s best days, which often cluster around the most volatile periods, can significantly reduce long-term returns. A regular, disciplined approach to investing tends to outperform attempts at clever timing.

2. Chasing past performance

It’s tempting to pile into whatever fund or sector has performed best over the last year, but past performance is not a reliable guide to future returns, and today’s top performer is often tomorrow’s laggard. Decisions should be based on whether an investment suits your goals and risk tolerance, not on a strong run that has already happened.

3. Underestimating the impact of costs

A difference of even half a percent in annual charges can compound into a substantial amount over twenty or thirty years. It’s worth understanding what you’re paying in platform fees, fund charges, and any adviser fees, and checking that the total cost is justified by the value you’re receiving, whether that’s active management, advice, or a particular investment approach.

4. Lack of diversification

Holding too much in a single company, sector, or asset class, including your own employer’s shares, leaves you exposed if that one area performs badly. Spreading investments across different asset types, regions, and sectors doesn’t eliminate risk, but it reduces the chance that one bad outcome derails your whole plan.

5. Letting emotion drive decisions

Panic-selling during a downturn and euphoric buying during a boom are two sides of the same problem: letting short-term sentiment override a long-term plan. Markets go through cycles, and reacting emotionally to volatility tends to lock in losses or buy in at inflated prices. Having a clear plan in advance, and revisiting it rather than abandoning it when markets move, tends to produce better outcomes.