Most common investment mistakes

In this article—and in the accompanying video—we show you the most common investment mistakes that affect investors. Whether you are just starting out or have been investing for a long time, you will learn how to recognize these mistakes and avoid them in the future.

Video: The most common investment mistakes explained – Interview with Patrik Schär and Stefan Jaecklin

In the new video, Patrik Schär (CEO of Selma Finance) and Dr. Stefan Jaecklin (investor, Selma board member, and long-time investor) talk about the most common investment mistakes—and how you can avoid them.

You will learn:

• why emotions, a lack of planning, and false incentives repeatedly lead us astray
• how to recognize psychological, strategic, and systemic mistakes
• what really constitutes a good investment strategy – especially in uncertain times

Timestamps

Psychological investment mistakes

00:45 Herd mentality & FOMO – why we follow others

02:57 Overconfidence – when confidence costs returns

05:27 Loss aversion – why losses weigh so heavily

08:24 Market timing – the illusion of perfect timing

12:18 Emotions – panic, euphoria, and knee-jerk reactions

Strategic investment mistakes

15:29 Investing without a plan – why goals are crucial

18:45 Wrong strategy – factors that influence your strategy

23:25 No adjustments – why “buy & hold” is not enough

System errors in investing

25:56 Kickbacks & hidden fees – what you should watch out for

29:37 Influencers & media hype – who can you still trust?

32:20 Gamification – why investing is not gambling

36:09 Scams – why there are no guaranteed profits

Summary

39:40 Learn from your mistakes

42:38 How Selma can support you

Psychological investment mistakes: When emotions rule

Psychological investment mistakes happen when emotions like fear, greed, or uncertainty mess with your decisions. Instead of thinking straight, you buy too late, sell in a panic, or hold onto bad investments. Over time, this hurts your returns and your nerves.

Here are the most common psychological mistakes and why they're so tricky:

FOMO (fear of missing out) & herd mentality

When “everyone” suddenly starts investing in tech, crypto, or real estate, we don't want to be the last ones to jump on the bandwagon. This fear of missing out (FOMO) often leads us to get in too late and then sell in a panic when the market takes a downturn.

Overconfidence

Many investors overestimate their investment skills. They believe they can beat the market or predict price movements. This overconfidence leads to frequent trading, higher risks, and often lower returns.

Market timing illusion

There is no such thing as the “perfect time” to buy or sell—even if we would like to believe there is. Those who constantly try to time the market easily miss out on the best days on the stock market. This costs a lot of returns in the long term.

Loss aversion

Losses weigh twice as heavily emotionally as gains of the same size. This fear causes investors to sell too early or avoid risky but sensible long-term investments altogether.

Disposition effect

Investors realize profits too early and hold on to loss-making investments for too long. The desire to “at least not make a loss” blocks rational decisions. This investment mistake is one of the most common reasons for poor investment performance.

Recency bias

Recency bias describes the overvaluation of current events. After strong stock market years, many investors believe that things will always continue this way. After crashes, on the other hand, it is often assumed that markets will never recover.

Sunk cost fallacy

Money already invested influences future decisions, even though it is rationally irrelevant. Investors hold on to bad investments because they “have already invested so much.” This error in thinking prevents objective reevaluations.

Anchoring (past anchors)

Past prices or one's own purchase price serve as a mental reference point. Investors refuse to sell until a certain price is reached again. Current fundamentals are ignored.

Emotional knee-jerk reactions

Emotions such as fear, euphoria, or stress lead to impulsive decisions. Panic selling or hasty purchases sabotage long-term investment strategies. This mistake occurs particularly in volatile market phases.

Strategic investment mistakes: When there is no plan

Emotions are not the only problem when investing; a lack of structure, unrealistic goals, or insufficient diversification often lead to costly mistakes. Many investors just “give it a go” without a plan. Here are the most common strategic pitfalls:

No clear investment plan

Without a clear goal, investing quickly becomes a gut decision. Those who don't know what they are investing for and for how long make inconsistent decisions and quickly lose their bearings.

Incorrect risk profile

Many portfolios do not match the investor's risk capacity or risk appetite. Too much risk leads to stress in times of crisis. Too little risk can mean that the money does not achieve its goals. Both are problematic in the long term. The risk you are willing to take is not always the risk you can bear in the long term.

Lack of diversification

One-sided portfolios are riskier than they appear. Those who focus heavily on individual stocks, sectors, or regions—for example, investing almost exclusively in Swiss stocks (home bias)—are foregoing stability and global opportunities.

Without sufficient diversification, a slump in one area can weigh on the entire portfolio.

No rebalancing

Many investors rely on a “buy and hold” strategy, forgetting that a portfolio automatically changes over time. When individual investments rise sharply, they increasingly take the lead, and the originally chosen risk quietly shifts.

Without rebalancing (i.e., regularly resetting to the planned weighting), your portfolio loses its balance: you take on more risk than you may be aware of – or miss opportunities in underweighted areas.

Systemic errors: When the environment distorts decisions

Not all investment mistakes originate in the mind—many are systemic. Banks, media, and platforms often create incentives that make good decisions difficult. This can be particularly costly for private investors.

Conflicts of interest in financial advice

Not all advice is independent—even if it appears to be. Many banks and providers receive commissions (known as kickbacks) when they recommend certain products. What may appear to be a conversation between equals is often a sales pitch. The issue is that you may not necessarily receive the best solution for you, but rather the one that benefits the provider the most.

Media hype & finfluencers

Finfluencers and stock market media have a major influence on investors – for better or for worse. There are many who provide solid financial education. But there are also those who rely on hype, panic, or quick profits. The media often reinforce this dynamic by paying particular attention to extreme market phases. This creates FOMO – or fear of missing out. It is important to note that not every tip is independent. And not every headline will help you.

Gamification

Many trading apps specifically rely on game mechanics: push notifications, rewards, animations. This emotionalizes buying and selling—and tempts you to trade frantically. Why? Because their business model depends on how often you trade. The more you click, the more they earn. But if you want to build long-term wealth, you need the opposite: calm, structure, and a strategy. Good apps help you stay invested, not constantly active.

Scams & dubious providers

“Guaranteed profits,” “VIP access,” or “secret strategies”: especially in uncertain times, offers that are too good to be true are booming. Many of these scams appear legitimate at first glance—with real websites, fake celebrities, or purchased reviews. But they are often unregulated and prey on your greed or uncertainty. The result: total loss. Remember: anyone who promises fixed returns is not playing with open cards.

Conclusion

The 20 most common investment mistakes are not caused by a lack of knowledge, but by emotions, a lack of structure, and false incentives. Many investors actually know what would be sensible—but fail to implement it consistently. This is exactly where digital, structured investment solutions come in.

Selma helps to avoid typical investment mistakes by implementing decisions in a systematic, disciplined, and emotionless manner. Instead of acting impulsively, investments follow a clear strategy based on goals, time horizon, and risk profile. This makes investing easier, calmer, and more consistent in the long term.