6 Top Investing Mistakes to Avoid: Falling for These Common Traps Could Cost You Big Time

In recent months, stock prices have surged, and media headlines are brimming with speculation about whether the rally will continue. While it can be tempting to chase the next big trend or try to time the market perfectly, history shows that these strategies often backfire. Investing successfully is less about reacting to headlines and more about maintaining a disciplined, long-term approach that aligns with your financial goals.

Even seasoned investors fall prey to common investing myths that can erode wealth over time. Here, we outline six top investing mistakes to avoid and explain how to sidestep them.

Myth #1: I Can Wait for the Best Time to Get in the Market

One of the most pervasive misconceptions is that you can time the market to invest only at the perfect moment. When markets are at record highs, many investors fear a looming correction and hold off investing. Unfortunately, timing the market is notoriously difficult, even for professionals.

A practical strategy for those concerned about entering the market at the “wrong” time is dollar-cost averaging. This approach involves investing a fixed amount at regular intervals, smoothing out the impact of market volatility. While research indicates that investing a lump sum may yield higher long-term returns, dollar-cost averaging reduces the stress of choosing the right entry point.

The bigger risk often lies in staying on the sidelines too long. Missing just a few of the market’s best-performing days can drastically reduce long-term gains. Instead of trying to predict market peaks and troughs, focusing on consistent, disciplined investing—staying invested with a strategy you can maintain—can be far more effective.

Myth #2: It’s Safer to Keep Money in a Savings Account

Many people assume that cash is the safest option, but overreliance on savings accounts can erode purchasing power due to inflation. Prices for essentials like housing, food, and education tend to rise over time. That $100 in your account today may buy significantly less in five years.

Investing in assets with the potential to outpace inflation helps protect your wealth over the long term. While not every investment has to aim for double- or triple-digit returns, a balanced approach combining safer investments and growth-oriented assets can provide meaningful growth.

Consider this example:

Even a modest increase in returns over time can make a dramatic difference. The key is creating a portfolio that balances growth with stability—one you can maintain through market ups and downs.

Myth #3: Investing in the Stock Market Is Too Risky

Fear of loss is a natural human response, and many investors overestimate the risk of investing in the stock market. The truth is that risk can be managed. Diversification is a powerful tool—spreading investments across multiple stocks, sectors, or asset classes reduces the impact of any single investment underperforming.

For instance, putting all your money in one company is far riskier than investing in a diversified fund, such as a mutual fund or an exchange-traded fund (ETF). These investment vehicles offer professional management and exposure to a wide range of companies, reducing the impact of individual stock losses.

Asset allocation—the mix of stocks, bonds, and cash—also plays a critical role in managing risk. And time in the market matters: the longer your investments remain, the more likely they are to recover from short-term downturns. History shows that, over extended periods, stocks generally trend upward. By sticking to a diversified plan, you can manage risk while still pursuing your financial objectives.

Myth #4: Investing Is Too Complicated and Time-Consuming

Investing doesn’t have to be overwhelming. Many investors overcomplicate the process by trying to pick individual stocks or follow every market trend. The reality is that simple, structured approaches work best for most people.

Options for simplifying your investing include:

• Target date funds: Professionally managed, diversified funds designed for retirement or other long-term goals. They gradually shift toward a more conservative mix as you approach your target date.
• Asset allocation funds: Maintain a consistent mix of stocks, bonds, and other assets based on your risk tolerance.
• Managed accounts: Offer professional guidance and personalized portfolio management, helping you stay on track with minimal hands-on effort.
• Robo advisors: Digital platforms providing low-cost, automated investment management. They offer planning tools and portfolio rebalancing with minimal manual intervention.

These tools allow investors to focus on long-term goals rather than constantly monitoring market fluctuations.

Myth #5: You Need a Lot of Money to Start Investing

Historically, investing required significant capital and access to a broker, putting it out of reach for many. Today, entry barriers are practically nonexistent.

Many mutual funds have no minimum investment, and ETFs often allow purchases without fees. Robo advisors like Fidelity Go® enable investors to start with just a few dollars while still accessing professional management. This democratization of investing means virtually anyone can start building wealth, regardless of income or net worth.

Myth #6: Investment Advisors Are Just Trying to Sell Products

Skepticism about financial advisors can prevent people from seeking guidance. Some investors worry that advisors are primarily motivated by commissions rather than client interests. While it’s true that advisors are compensated in different ways—commissions, hourly fees, flat fees, or a percentage of assets under management—transparency is key.

The Securities and Exchange Commission (SEC) provides guidance on evaluating advisors and the questions you should ask. It’s essential to understand how advisors are paid, what services you receive, and how recommendations align with your goals. Working with a trusted professional can provide personalized strategies, helping you avoid common pitfalls and stay on course for long-term success.

The Bottom Line: Discipline Beats Timing

Investing is accessible to everyone, and you don’t need to have extensive resources or trade frequently to succeed. The fundamentals of investing—diversification, asset allocation, and a long-term perspective—remain the most reliable way to grow wealth. Avoiding the common mistakes outlined above can help ensure your investments contribute meaningfully to your financial plan.

Whether you choose to invest through a managed account, a target date fund, or a personally selected mix of mutual funds, a disciplined, long-term approach can help you reach your financial goals. Key steps include:

1. Determining an asset mix aligned with your goals and risk tolerance.
2. Maintaining well-diversified, professionally managed investments.
3. Rebalancing your portfolio periodically.
4. Avoiding the temptation to “tinker” based on market noise.
5. Sticking to your strategy over time.

Your investments are an integral part of your overall financial plan. Utilizing resources like Fidelity’s Planning & Guidance Center or consulting with a qualified financial professional can help ensure your investment strategy aligns with your broader objectives, whether for retirement, education, or wealth accumulation.

Investing may seem intimidating, but falling for myths or common traps can cost you far more than the initial effort to learn and implement a sound strategy. By staying disciplined, focusing on long-term goals, and leveraging tools and guidance available today, you can build wealth effectively and confidently—avoiding mistakes that many investors make along the way.