5 Investing Mistakes That Are Easy to Make

Investing mistakes can be easy to make. Avoid the 5 most common ones listed here!

Let’s face it, we’re all human. We all make mistakes, some of them can be costly and some not so costly. The ones I hate the most are investing mistakes. In a previous life I worked with retail investors on a daily basis and witnessed firsthand (often with disbelief) some real doozies of investing mistakes, which would always make me scratch my head and wonder what the person was thinking.

My favorites were always the ones who knew they were guilty of doing something completely senseless, yet would continue to throw good money after bad and continue to losing money in the stock market.

We All Make Investing Mistakes


Despite well laid plans even the best of us make mistakes. I know that I have been guilty of making them myself, especially mistakes when investing in the stock market. About 18 months ago I made a doozy of a mistake, which I thankfully was able to get out of quick enough. We all know who Groupon is, many of us have probably bought one in the past. Against my better judgment I bought some shares once it hit the market for Mrs. Frugal Rules’ retirement account at Scottrade as she wanted some shares.

This is not to throw her under the bus, but there were things that did not sit right with me as they were coming to market. They came out priced at $28 per share and I bought some shares right near the IPO price. The problem is that it started sinking like a rock soon after because the suspicions were true. After holding the stock for several months I was able to get out at $24 per share, but was still mad I had lost the money.

Where is Groupon today? Well, they’re in the $5 range and I could not be happier that I was able to get out of the stock when I did. In fact, I feel ridiculous for even admitting that I bought the shares.


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Using the Wrong Type of Order


There are two major order types when you’re looking to place an order to buy a stock: Market Order and Limit Order. There are other order types, but these are the most common and should generally be what you’ll want to look at if you’ve just started investing in the stock market.

Think of a market order as going to the store to buy an item and you do not care about the price; you just want it right away. By using a market order, your order goes to the stock market right away to seek execution. The limit order, on the other hand, is like going to the store and wanting to pay only a specific price for the item in question. While the market order may get you one of the stocks you want, you have no guarantee on the price.

Using the limit order might not guarantee getting or selling the stock you want, but you get execution at or near the price you want. This may not seem like much of a problem, but it is one of the easiest investing mistakes to make. I’ve had numerous times where I tried to buy a stock and ended up paying a bit more for it because I used a market order and was not around to watch it throughout the day.

Logging into Your Account Once a Year


I’ve written before about not checking up on your investment account constantly, but you certainly don’t want to go on the other end of the spectrum by never checking in on it. This is also one of the easiest investing mistakes to avoid and one that can be quite costly if left alone. I regularly spoke with investors who would only log in to their accounts twice a year…right before the end of the year and right at the end of tax season.

The problem with this buy and click mentality is two-fold: first it leaves way too much to chance and second, it leaves no time to properly plan for things. One way I suggest to avoid this investing mistake is to log into your investment account at least once a month or once a quarter. This will allow you to see how your stocks are doing as well as clean anything up that might need your attention. If this is something you tend to be guilty of, check out my favorite financial tool – Personal Capital. Personal Capital is a free tool that offers many awesome tools that allow you to track your spending, monitor your net worth as well as a free portfolio review!

Letting Others Make Your Decisions For You


I know some have turned their investments in the stock market over to a financial advisor. That’s great and many of them can be very helpful in guiding you through making investing decisions. However, this does not release you from culpability. Make sure you check up on your investments on a regular basis so you can be informed as to how they’re performing. If they’re not at the level you’re wanting or are finding fees to be too high then talk to your advisor about it. Part of their job is to make sure that you are in something that fits your needs as well as helping you understand what your investments are doing.

One thing I also advised retail investors to do was possibly take a small amount and invest it on your own so you can have a better grasp of the stock market. On a related side note, one of the investing mistakes that is always frustrating to see is investors basing their decisions off of what the “experts” say on CNBC. I am sure some of those individuals truly know their stuff, but please don’t base decisions off of what Jim Cramer might think is best.

Learn what the 5 most common investing mistakes are and what actions you can take to avoid them.

Hoping that Your Stock Will Bounce Back


Investing in the stock market certainly has its ups and downs, thus why it’s so important to separate your emotions so you can avoid additional investing mistakes. This is where having a clearly defined investment plan can be your best friend. Part of my investment plan is to set a stop loss order so I can get out of a stock once it loses 25 percent, no matter what.

This means that once a stock I have bought reaches that level it goes to the market to be sold. This helps me avoid holding on to a stock hoping that it’ll bounce back. As someone who has been in the investing industry for some time now, let me share a little secret with you…rarely will a stock bounce back in order for you to recap your loss of principal.

I understand the desire to do this, but it is one of the most common investing mistakes that retail investors make and it can really make a dent in your overall portfolio. I’ve done it myself too many times to count and I have vowed to not let it happen again, which is why my investment plan can help with that. The same can be said of also not being too greedy with an investment. If a stock has seen solid gains and you’re happy with them don’t wait around for it to start to slip significantly. I’d much rather have all of my gain as opposed to losing half or more because I was greedy.


What investing mistakes have you made in the past? What do you do in order to avoid repeating those mistakes?



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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to U.S. News & World Report, Investopedia, Credit Karma and more. If you're wanting to learn how to monetize your blog, check out my blog coaching services to see how I can help you take your site to the next level.

Latest posts by John Schmoll (see all)


  • You mentioned my mistake of not having an exit plan. When I first started investing in stocks, I really didn’t have a plan. I rode Worldcom all the way from $41 down to bankruptcy. I even bought more at $5 thinking it was going to come back! You need to set a target price that if the stock hits that price, you sell. This target should move along with the stock on the way up as well, so that you can experience a gain if the stock rises in price and then trends down.

    • John says:

      Ah, WorldCom! A lot of people got caught up with them and ended in the same situation unfortunately. Great point on having a target price, which adjusts on the way up, on a stock. I do that on a percentage basis and is a great way to keep the emotions separate from the decision.

  • Hoping your stock will bounce back is probably the easiest mistake to make. I know there has been a couple of situations where I should have moved the money to a different stock but let it sit because I wanted to “get my money back!”

    • John says:

      That it is DC. I have been caught by that myself too many times to count and I hopefully have learned my lesson. It’s much more preferable to lose 20% as opposed to 80%

  • Ah, using the wrong type of order…I’m pretty sure that everybody who has invested online has made that mistake before…Or maybe it is just me:)

  • Jose says:

    I think I have made each of those mistakes at least once. I also rode MCI Worldcom down into the bankruptcy. A lot of this has to do with emotional investing. I wrote a post on that recently (unfortunately I can’t bring it up on comment luv) which might be worth a read. I wrote about how emotional investing is not a good strategy and why it’s wise to separate your emotions from your investing and stick to the strategy you’ve outlined for yourself.

    • John says:

      Another WorldCom casualty, sorry to hear that. I could not agree more about keeping those emotions separate when investing. I wrote a post about it as well, I think it’s actually linked to in this post. :) Those emotions can really ruin a strategy very quickly.

  • I have accidentally made a market order instead of a limit order before. It is easy to do if you aren’t paying attention. I remember the time that I did it, it was the first time I had been trading on my phone and my settings were all different. Almost ended up being very costly.

  • AverageJoe says:

    Logging into your account once a year! Ha! Sadly, I know too many people who do that….how can you be a great investor if you never, ever pay attention? Sometimes I think people hide behind “buy and hold” thinking it’s the same as “I don’t need to look.”

    • John says:

      Lol! I know Joe, it makes absolutely no sense to me at all. My favorite part was getting yelled at by clients when they’d get upset because we did not call them to tell them to do something. I guess the term self directed is a confusing one to many.

  • Not researching enough on the stock and only buying it based on the tip of someone else. Luckily it worked out for the better, but I know my next stock purchases will be based on my own decisions. I’ll feel better about my purchase if I educate myself more.

    • John says:

      That can be a tricky one to avoid as you never know how well informed that friend is on a stock. I have made that mistake in the past myself, but have since moved to doing my own research.

  • You got out of that one at the right time then! I remember a post you wrote about taking the emotion out of investing and I bet having your 25% loss rule helps with that, making the decision for you.

    • John says:

      Yes I did Adam! That stop loss rule I have is a great way to keep those emotions separate. It can be tempting to disregard it at times, but I’d much rather lose 5% as opposed to 40-50% or more.

  • Nice post John. I would add to your point about having an investment plan that ideally investors have an over financial plan off of which their investment strategy is based. This ties into various goals, the investor’s risk tolerance, and an overall investment allocation.

    • John says:

      Thanks Roger! I could not agree more. I have written pieces on most, if not all, of those areas that are needed to be focused on. They all play a vital part in having a sound overall strategy/plan.

  • pauline says:

    Exiting too early in case of a profit and keeping losses too long, logging to my account 12 times a day… twice a year isn’t good but getting obsessed and emotional is even worse!

    • John says:

      Very true Pauline, though that is why balance is needed. I’ve seen extremes of both ends and neither are good, which is why I suggest checking up on things once a month/quarter. If you never check up on it then how can someone know what’s going on?

  • I am guilty of hoping that a stock will bounce back. Usually just to see it slide further down. I’ve been thinking about establishing hard selling rules in addition to being entirely unforgiving when it comes to dividend cuts.

    • John says:

      I have as well MFIJ, thus the reason for my hard sell out at a certain loss point strategy. Before I had that it was just left to emotion or however I felt about the given stock. Dividend cuts could be a very good thing to add as well to the idea as that can generally mean something is awry.

  • Since I have just started investing, I haven’t really made any noticeable mistakes. I did invest in a fund that had a high expense ratio before I knew about expense ratios, but I moved the money into another fund after I found out. Sorry to hear about the Groupon buy. That stock made me nervous ever since they went public. Their accounting was horrid.

    • John says:

      That’s awesome Grayson, though those expense fees can be easy to overlook. I still can’t believe the Groupon call. I knew something was amiss about them and went against my better judgment. I am just glad I could get out when I did. I would seriously be hating myself if I were still sitting with it now.

  • I have a hard time figuring out when to sell. It’s my biggest problem and I haven’t found a way to remedy it yet. That’s why I like investing in index funds/ETF now. It’s easier to just keep buying.

    • John says:

      It can be difficult to make that decision, thus why I have a hard stop loss in place to remove that stress from me. Investing in index funds is a great way to help mitigate that.

  • I’ve made all of these mistakes minus the checking my account once a year. I can’t believe I’m about to say this but I believe it’s imperative that all investors feel the pain of these mistakes early on in their careers on a small scale so they learn to NEVER do them again once their portfolios are much larger. It’s like the old saying goes “Some lessons have to be lived in order to be understood.”

  • I think I’ve probably only ever used market orders. Besides being the default, it’s by far the simplest way. Considering the cost of transaction fees, missing out on twenty cents isn’t really a big deal for me. In 35 years, that twenty cents is still worth less than $3!

    • John says:

      It is the simplest way Edward, thus why I do it 90% or more of the time. I mainly use limits if I am looking to sell. The little bit more I might pay on the buy really does not amount to much in the long run.

  • I’m still a beginner investor and have never dabbled in the stock market, but the list you wrote is definitely good to keep in mind when I do.

  • All great points that make my financial advisor heart smile! It’s funny how people can go to extremes – checking their investment multiple times each day to never. There has to be a happy medium. :) One of biggest misconceptions people have about financial advisors is that they do it all for you. Well, any advisor who says they will take care of everything and you don’t need to worry about thing – is not the person you should hire. A good advisors find solutions, shows you the pros and cons in relation to your specific situation, makes a recommendation then ultimately lets you decide. A person who gets to throw tantrums and smash things should also not be your only source of investment information.

    • John says:

      Thanks Shannon! I could not agree more in terms of having a happy medium. I never understand the extremes that some will take with their money. There is a happy medium to have and it’s not al that difficult to find. Thank you as well for your insight from an advisor’s perspective. I agree that one who says they’ll take care of everything is not one you should go with. I view an advisor as the expert who has the knowledge (hopefully) to be able to give an objective perspective that the client can use to make an informed decision. As I am sure you’re well aware of, it’s amazing the number of people who use one over the top source for their investment education/information.

  • Suba says:

    I am a passive investor so I have not bought or sold much. I just out $x every month into my portfolio which I rebalance once a year, that is as much as I do right now. I am tipping my toes into dividend investing, but I am taking it very slow.

    The biggest mistake I did was actually not starting sooner. I was “afraid” of investing. I didn’t understand it and was horrified that I will lose all the money. I should have started with a target date fund or something and just started to invest. I lost my first 3 yrs of working with $0 in my 401k.

    • John says:

      That’s a great approach to take Suba, one that I follow to a certain extent. I’ll log in and check things out maybe once a week or so and do my rebalancing annually. Sure, it’s not “sexy”, but slow and steady wins the race in my opinion.

      A lot of people are in the same boat in terms of not starting sooner, I know I was. Time is the greenhouse to growing our money, but that “fear” can hold us back at times.

  • I think my biggest mistake is not investing more years ago. I would have a much bigger balance right now if I’d elected more than 3% of my salary. I certainly wouldn’t have missed and might have bought less stuff I didn’t need. Oh well, nothing like catch up!

    • John says:

      I know the feeling Kim, I started too late myself and gave up the free money. Sadly much of that money was spent on useless things I did not need. The important thing is to realize that and doing what you can to invest more now.

  • I haven’t invested in stocks yet but I do enjoy watching how things turn out. I missed what happened with Groupon. I can’t believe they are trading at 5 bucks now. The concept was brilliant but then they got so much negative publicity which ruined things pretty quickly for them. Good thing that you got out quickly :-)

    • John says:

      The problem with Groupon was that there was some very serious questions about their accounting and their business model. I think their concept is a good one, but some of their dealings have been shady. I am glad got out to, I don’t like taking a beating like that. :)

  • I think the only one of these I’m not guilty of is logging into your account once a year. I log in to check the status of everything almost obsessively!

    Buying a stock based on a tip from someone you know is something I did a lot when I first started out. It wasn’t until I took my first big loss that I decided I shouldn’t trust my money to someone elses ideas & I started doing a lot of research before buying anything.

    • John says:

      It can be tempting to listen to those tips, especially when you’re starting out investing. I know I did it in the past. Putting in that research is the real way, I have learned, to be able to make a much better informed decision in regards to investing.

  • Justin@TheFrugalPath says:

    My biggest investment mistake was buying because of what people were saying on Yahoo forums, really good place to get investing advice right? I bought a fertilizer stock that had been rocketing for a while near it’s peak. I sold at a slight loss, but continued to make the same mistake. Now I prefer ETFs because for some reason I can sleep better.

    • John says:

      Gotta love the Yahoo Finance message boards. 😉 I go there when I want a laugh, so glad you were able you were able to get out with a slight loss. It’s all about what helps you sleep at night, so it’s good you’ve found that with some ETFs.

  • Jim says:

    John, great post! One other mistake that kinda goes along with hoping the stock will bounce back, is not taking profits when you are up. Either because you think it will go higher, or because you dont want to pay a tax liability, either way you are making money. Last I heard, you cant go broke making money!!!

    • John says:

      Thanks Jim! I agree that being greedy can be a big mistake as well and one that I’ve made too many times to care to remember. You’re right, I’d much rather make money as opposed to losing it.

  • My biggest mistakes happened when I got involved with the options market when I really didn’t know what I was doing. Even after I educated myself about options, I still had very few winning trades. I know it has its place and you can make money using that investment strategy, but it’s extremely hard and the risk is so great.

    • John says:

      I would completely agree Brian. Options can be a good tool to use, but should only be done with education. I’ve seen some retail investors get themselves in a real pickle by doing something they really should not be.

  • Great post
    I don’t invest in stocks on my own but I would love to but the fear to get over being new is what is hard. I don’t know where to start. I do know I’d likely be the person who checks their account quite often, just because I can. SO, if your stock loses 25% and you go to sell it who would buy it if it’s already lost 25%? How does that work? Sorry if it’s a silly question although I know no question is a silly one when you are trying to learn.

    • John says:

      Thanks Mr. CBB! I understand that fear, though it can be mitigated with some education which is readily available. Sure, there will generally be someone to buy it. I generally only deal with blue chip stocks which trade heavily enough that getting out of it should not be an issue. There’s no such thing as a silly question in my opinion, especially when it comes to investing.

  • Hoping that a stock will come back is a psychological aspect to investing that can impact people’s level of success. It might be good to think in terms of a sunk cost concept, where we aren’t anchored to what we paid in the past.

    Plus, the math of recovering from losses is not favorable. If you start with $100 and lose 20%, you’ll have $80. To get back to even, you’ll have to gain 25%!

    • John says:

      You’re exactly right. I love your sunk cost concept, as it really fits in this situation.
      Great point on needing to gain back 25% when you loss 20%! Not only do you need to gain back what you lost, but you need to earn back more, on a percentage basis. Thanks for stopping by!

  • Buck Inspire says:

    Great tips John! I feel your pain about Groupon. I confess I got faked out with the Facebook IPO and just grinding it out right now. Guess I am also guilty of “Hoping the stock will bounce back”. I also really messed up on a market vs limit order as well. Bad Buck! Good job John!

    • John says:

      Thanks Buck! I learned my lesson with Groupon to not buy into the hype surrounding FB. Glad you were able to get out from under that. Those order types get the best of us. :)

  • Love this post, John. Do you have a post in your archives somewhere that’s kind of an “Investing for Dummies” type of a post? We’re putting a bit away for investing as we pay off our debt, and I would love to know what I’m doing when the time comes. :-)

    • John says:

      Thanks Laurie. I have a few posts that are towards that bent, though some of them build on each other as it can be difficult to put that into one post. I am actually giving thought to writing an E-book or book on that very idea…though, that is a longer term goal of mine. If you ever have any questions, please don’t hesitate to ask me.

      • Thanks. :-). I love the book idea too. I think it would be a great seller. We’ve published 4 now, so if you ever have any questions on that, I’d be happy to help you, too.

        • John says:

          Thanks for the encouragement Laurie.:) I always tend to hold back on my investing posts because I don’t want to make people go cross-eyed or write 3,000 word post. I figure a book will allow me to cover more and let my inner geek loose….to a certain extent. :) I’ll definitely seek you out I/when I do have questions.

  • I think you’re right, there is nothing worse than letting someone else make the decisions for you. Nobody will care about your money and how much it earns more than you. As a result, nobody will do the research you would do nor would they truly take your appetite for risk into account. Unless you’re blindly dumping into a Vanguard retirement fund or something, you should definitely do the investing yourself!

  • My perspective is to not buy individual stock but to invest in a diversified portfolio of large, medium and small mutual funds covering growth, value and blend. This eliminates a lot of the problems you speak of but you still need to monitor your investments. Also use index funds in these categories and consistently invest to take advantage of dollar cost averaging.

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