The 7 Biggest Mistakes Investors Are Making Right Now—and How to Avoid Them

If this year’s market volatility has you second-guessing your investment strategy, you’re not alone. With the market falling nearly 20% earlier this year and unsettling headlines about inflation, tariffs, and economic slowdowns, many investors are wondering if it’s time to change course.

But history tells us that trying to outguess the market often does more harm than good. The reality is that while investors can’t control whether stocks rise or fall in the next year, they can control how they respond. Avoiding rash, emotional decisions and sticking to sound investing principles is often the difference between long-term success and costly mistakes.

Below, we’ll cover the seven biggest mistakes investors are making right now—and what you can do to sidestep them.

1. Avoiding Investment Decisions Due to Uncertainty

Uncertainty has always been part of investing. Whether it’s tariffs, elections, inflation, or employment numbers, there’s never a time when markets feel “completely safe.” Some investors are holding off on investing altogether, hoping for a perfect environment before they jump in.

The problem? That day rarely comes. Investors waiting for clarity often sit on the sidelines while markets continue rising. Historically, stock markets have grown over the long term amid constant uncertainty.

How to avoid this mistake: Instead of waiting for perfect conditions, develop a disciplined strategy. Invest gradually—through approaches like dollar-cost averaging—so you stay invested without needing to perfectly time the market.

2. Always Expecting the “Next Shoe to Drop”

Scary headlines can make investors believe a major crash or recession is imminent. While recessions do occur, over-focusing on negative news can keep investors out of a market that’s actually performing relatively well.

Take today’s environment: corporate earnings remain solid, unemployment is low, and analysts expect earnings growth in 2025. While a downturn may eventually happen, the market has always recovered—even from recessions and depressions—often beginning to rally before the economy itself turns around.

How to avoid this mistake: Don’t let pessimism dominate your decisions. Instead of trying to avoid every potential downturn, build a portfolio that balances growth potential with risk management. This allows you to weather volatility while staying invested.

3. Waiting for Cheaper Valuations

After strong returns over the past three years, some investors believe U.S. stocks are too expensive and are waiting for lower valuations before buying.

It’s true that forward price-to-earnings ratios are above average. But history shows valuations are unreliable predictors of short-term returns. Markets can continue to rise even when valuations appear high. More often, high valuations reflect strong earnings expectations—not an automatic signal to sell.

How to avoid this mistake: Don’t sit idle waiting for the “perfect” entry point. Instead, make sure your portfolio is well diversified—across U.S. large-cap, small-cap, international, and emerging markets. This spreads out valuation risk while still keeping you exposed to potential growth.

4. Holding Too Much in CDs and Short-Term Investments

With rising interest rates, short-term CDs and Treasurys have become attractive again. While these investments offer stability and predictable cash flow, they come with a tradeoff: limited growth potential.

Over time, inflation erodes the real return of short-term investments. Historically, stocks have outperformed bonds, CDs, and cash equivalents by a wide margin over the long term. For investors with years (or decades) ahead of them, relying too heavily on short-term assets can mean falling short of long-term financial goals.

How to avoid this mistake: Use CDs and Treasurys for near-term needs or as part of a balanced portfolio, but don’t over-allocate. If you have a long horizon, ensure you maintain exposure to equities, which have historically provided stronger inflation-adjusted returns.

5. Trying to Predict the Future

Market forecasts, economic predictions, and stock calls are everywhere. Some investors even enjoy making their own predictions, treating markets like a puzzle to be solved. But relying on forecasts can backfire.

Even when predictions turn out correct, markets usually price in the news before most investors can react. No single voice—no matter how persuasive—has consistently predicted the market’s next move.

How to avoid this mistake: Instead of chasing predictions, focus on what you can control: building a diversified portfolio, managing costs and taxes, and sticking with a long-term strategy. A rules-based plan beats guesswork every time.

6. Not Factoring Taxes Into Investing Decisions

Taxes are one of the most overlooked aspects of investing. Many investors focus on returns but forget that frequent trading or holding tax-inefficient investments in taxable accounts can eat away at those gains.

For example, selling stocks within a year means paying higher short-term capital gains tax rates. Similarly, holding actively traded mutual funds in taxable accounts can create unnecessary tax liabilities.

How to avoid this mistake: Be tax-aware when investing. Use tax-advantaged accounts like IRAs or 401(k)s for less tax-efficient assets. In taxable accounts, consider index funds or ETFs with low turnover, and take advantage of long-term capital gains rates. Tax-loss harvesting—selling losing investments to offset gains—can also help reduce your tax bill while keeping you invested.

7. Letting the Perfect Be the Enemy of the Good

Many investors get stuck in “analysis paralysis.” They constantly ask: What if I pick the wrong stock? What if the market crashes tomorrow? What if there’s a better option out there?

The truth is, investing will never be perfect. Even seasoned professionals don’t have all the answers. But historically, the biggest mistake has been staying out of the market altogether. Over long periods, investors who remained invested—through ups and downs—fared much better than those who waited for the “perfect” moment.

How to avoid this mistake: Once you’ve built a reasonable plan, commit to it. Accept that no plan will ever be flawless. Consistency and discipline often matter more than perfection.

Final Thoughts: Focus on What You Can Control

Volatility and uncertainty will always be part of investing. The key to long-term success isn’t predicting every market move—it’s avoiding the behavioral traps that lead to poor decisions.

By resisting the urge to sit on the sidelines, avoiding fear-driven reactions, maintaining diversification, factoring in taxes, and staying committed to a plan, you can sidestep the seven biggest mistakes investors are making right now.

Remember: the most successful investors don’t chase certainty—they embrace discipline.