Mistakes happen. But when it comes to investing your money, you want to make sure you're protecting the wealth you generate. Here's what not to do as an investor, according to experts.

By Hiranmayi Srinivasan
May 13, 2021
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Investing can help you grow your money and create wealth. But common investing mistakes—such as constantly changing strategies to keep up with the Joneses—can ending up hurting your investments. So fight the FOMO you feel when you see everyone hopping on the newest trend (sorry, Dogecoin) and instead diversify and own a little bit of everything.

"When people are new to investing, it can be a challenging learning curve and mistakes are quite often inevitable," says Marjorie Radlo-Zandi, an angel investor. If you are new to investing (or thinking about starting), here are some common mistakes, plus how to avoid them so that your money is being invested wisely.

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1 Not investing at all.

They say you miss 100 percent of the shots you don't take—same goes for investing. Turns out, not investing at all is one of the biggest mistakes you can make, so start investing now.

"One of the most common investing mistakes people make is that they think investing is not for them," says Mary Sullivan, co-founder of Sweet But Fearless, a platform that provides career support and free financial literacy workshops focused on women. You don't have to be a finance expert to start investing either. "Get started now and activate your savings and investment plan as soon as possible," says Sullivan. Look for online courses, books, or podcasts to learn the basics of investing and get started.                                          

2 Not knowing your "why."

Not being clear on your goals can prevent you from making thoughtful decisions on your investments and can lead to making decisions that are more impulsive. "Getting crystal clear on 'what the money is for' and 'why that is important' is critical to making well-thought-out decisions," says certified financial planner Julie Quick.

If you're an angel investor, make sure you don't get too attached to the technology or product without thoroughly vetting the leadership. "Look for a balance of technical wizardry and high-level business know-how," says Radlo-Zandi. Be clear on your goals and values when you begin your journey as an investor so you can make moves that will result in growth—not loss. 

3 Holding too much cash.

A 2017 survey by BlackRock found that women hold 11 percent more cash than men, and tend to be more conservative with their money. "I regularly work with MBA graduates with [over] $100,000 in cash because they aren't sure where or how to invest," says Eryn Schultz, founder of financial education platform, Her Personal Finance. Schultz says holding 25 percent of your money in cash could cost you more than $100,000 in retirement savings since cash declines in value over time because of inflation. The more you have to invest, the higher the impact of holding too much cash. 

4 Trying to time the market.

Don't try to time the market. This looks like waiting for the right moment to invest, whether that's waiting for the market to fall or be less volatile. "It's about being in the market, not timing the market," says Michael Dombrowski, head of capital markets at tech startup InterPrime. It's pretty much impossible to try and time when you're going to buy and sell—you have a higher chance of being successful the longer you are invested. 

Consistently investing is the best (and easiest) way to set yourself up for retirement, says Schultz. "Often the biggest two weeks of market performance happen very close to dips. Who would have thought the market would have rallied in March 2020 despite COVID-19?"

5 Not having an emergency fund.

Set aside an emergency fund in case of market crashes. Your emergency fund should have three to six months of living expenses, or more depending on your lifestyle, number of incomes, and dependents in your household. Either way, set aside emergency money that will not be invested. "If there is a market downturn, you don’t feel the need to react by selling in order to provide for short-term needs," says Quick. 

6 Not taking an active role in your finances.

A 2019 study by global wealth management company UBS found that while women are very aware of long-term financial needs, only 23 percent of women globally take charge of it. The study found that this issue is multi-generational and is true for millennials, too. "I would encourage everyone to be involved, at some level, in the household finances," says Quick.  "Everything from the family budget to investments toward long-term goals, such as retirement." Not having a full picture of your finances can cause financial anxiety, and will keep you from investing wisely—or at all. Check in on your finances at least once a month, or find a financial planning service that could help you.