15 Common Investing Mistakes to Avoid Like the Plague

To say that 2022 has been a turbulent year for the stock market would be, well, an understatement. While certain stocks and sectors have certainly outperformed the market, if you've experienced significant dips and peaks in your portfolio in recent months, you're in good company.

In any market environment -- and particularly during volatile periods -- it can be easy to give into bad investing habits that derail your portfolio goals and inhibit your returns over the long term.

Let's take a look at 15 extremely common investing mistakes you need to avoid like the plague in 2022 and beyond.

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Emotions like greed, fear, and panic have certainly infused themselves into the market lately. These kinds of responses to prolonged market volatility are as inevitable as the volatility itself. As a forward-thinking long-term investor, you can use these responses that are moving the market to your advantage.

For example, if investors panic and rush to sell off a stock in a downturn -- that apart from the turbulent market remains a quality investment -- this can present a unique opportunity to buy shares on sale.

If you find that you're approaching changes to your portfolio based on emotions like greed or fear, this could lead you to make a range of inadvisable decisions. During volatile periods, investors can be enticed into following fads or buying shares of businesses without a clear underlying strategy on the hopes of recovering their losses more quickly or stemming the volatility in their portfolios. Strong emotions can also cause investors to sell off a great stock simply because its price is down.

Emotion-based investing is a bad habit. It will not serve you well as a long-term investor or help you achieve the portfolio performance you desire. It's better to leave your portfolio alone for a time and dip back into the market when things have settled than to make rash decisions in the moment that leave your portfolio vulnerable to greater losses over the long run.

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When an analyst you like recommends a stock or you see investors piling into a specific company, it might be tempting to go ahead and take the plunge yourself.

While a series of analyst recommendations or market movements around a particular stock might indeed signal that the company is worth considering, you should never put your money into an investment without making sure that you thoroughly research it and understand it yourself.

Taking an objective look at any asset before you allocate your hard-earned capital can help you avoid putting your money into a business that has red flags or simply isn't the best use of your cash based on your personal investing goals.

It's important to understand that there is a strong distinction between the movements of the market as a whole and the performance of your personal portfolio. The basket of assets that make up your investment portfolio are personal to you, and so will be the returns you experience.

Likewise, another investor's portfolio performance may trail or exceed your personal returns, but that doesn't mean you're doing something wrong.

The composition of your portfolio should be predicated around a variety of factors, including the types of stocks and sectors you favor, your personal interests, your short- and long-term investing goals, and the appropriate level of risk that you've determined you're comfortable with.

Regularly assessing the balance of your portfolio while continuing to track earnings reports and other events that will fundamentally impact your investments can help you ensure that you stay on top of your holdings. This consistent approach to managing your portfolio can also help you determine when and where changes need to be made in a timely manner.

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You're not alone if recently you've seen a series of eye-catching headlines about a stock that you own and felt your heart plunge to your stomach. Then, to add insult to injury, shares of the company promptly sold off.

In today's market, this isn't an uncommon occurrence. And that's not to say you should never sell a stock you own, particularly if management is taking the company in a direction that you no longer align with or if there are fundamental changes to the business that change the core thesis behind why you bought it in the first place.

What is important is to look beyond the headlines and make sure you thoroughly understand the story and series of events behind them. Often, investors may overreact to a headline about a stock they own without processing that news in the context of their broader long-term investment horizon. They then end up selling shares of a great company based on short-term market or industry factors that will come and go.

Even if you are a brand-new investor, you should have a clear strategy in mind as you build out your portfolio. In determining your investment strategy, you should identify a variety of factors.

What's your personal risk tolerance? What are the types of assets you want to invest in (such as stocks, bonds, funds, real estate, or commodities)? Are you comfortable with more growth-oriented stocks, value-centric stocks, or a mixture of both? What are the sectors and industries you want to invest in?

Also consider: What are your near-term and long-term financial goals that you want your investment portfolio to help you achieve? An example of a near-term financial goal might be something like saving for a vacation or to buy a new car, while a longer-term financial goal could be buying a house or building your retirement nest egg.

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Between work and the general buzz of daily life, it can be easy to research a stock, invest in it, and simply leave it in your portfolio without further thought. While you should never buy a stock without having a minimum investment horizon of three to five years, it's not enough to get to know a company, put money into it, and leave it at that.

You need to stay on top of the stocks that you own. For example, you might check on your stocks every couple months or even once a quarter to evaluate recent earnings, read pertinent updates from management, and ensure that your investment thesis is intact.

Make a habit of regularly studying your investments. Not only can doing so help you avoid making rash decisions when the market is volatile and ensure you keep adding to your winners, but you can also check that the balance of your portfolio is still at your ideal ratio.

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Another common mistake that investors of all experience levels make with their portfolio is to fail to properly diversify their investments. While it's certainly possible to go to the other extreme and over-diversify your portfolio, as a general rule, you shouldn't tie up all your money in just a handful of stocks or sectors.

There are a few reasons for this. For one, diversifying your money into a range of different companies and industries can help you to augment your potential returns over a period of years. Plus, if you put all your money into only a few companies or sectors rather than diversifying it more broadly, you're far more likely to experience the full downside of market volatility, particularly if those companies or sectors are more cyclical.

A strategic portfolio diversification plan can help you provide a more equally weighted balance to the stocks you own, injecting various means of growth and lending more equilibrium to your portfolio to help you better benefit from the peaks and ride out the valleys of the market.

Trying to capture that perfect moment in the market to put your money in is not only an extremely difficult way to invest, but it's an incredibly ineffective one at that.

You could easily end up being wrong and go all in on a less-than-opportune investment. And even more likely, while you're waiting for that perfect moment, it could pass you by.

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Most investors hope their portfolio will beat the market over time. There's certainly nothing wrong with that.

That being said, making your investment decisions with that singular goal in mind may lead you to put your money into more speculative assets with the hopes of higher returns rather than investing based upon a fine-tuned strategy.

Investing your money in great businesses with wonderful leadership, strong balance sheets, and multiple means of generating business growth both now and in the future is how you keep sustaining returns over time that can help you build a market-beating portfolio.

The stock market itself is highly cyclical. Up and down days are inevitable. And often, the most fortuitous gains investors experience occur on a few days sprinkled throughout the year.

No one can know when those days will be. Rather than risking them passing you by while you wait on the sidelines, investing often rather than sporadically can ensure you are ready and waiting when those momentous days occur and can take advantage of stocks on sale when the market is down.

Over time, that regularity in your investing patterns can lend itself to tremendous and sustained returns, which is where the real building of wealth occurs.

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When the stock market is going through a prolonged period of extreme highs and lows, it can shake even the most stalwart investor's constitution.

But yanking your money out of the stock market when things turn turbulent won't help you build a portfolio that enables you to consistently move toward your financial goals, and it won't necessarily help you stem your losses, either.

In fact, you might lose even more money by selling your stocks when the market is down, rather than waiting for things to rebalance and benefiting from an inevitable market rebound.

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Over your investing journey, you might find that some of the most strategic and profitable investments you'll ever make for your portfolio are when the market is down. This isn't to say you should try to time the market or wait to invest all your cash when stocks are trading down.

However, taking full advantage of the abundance of stocks trading on sale when the market is trending downward and adding money to winning stocks in all market environments is how you realize and retain compounded returns over time.

The reality is that most investments won't be 10-baggers overnight. Long-term investing isn't a get-rich-quick scheme. It requires consistency, patience, and a certain level of fortitude to ride out the ups and downs of the market.

The way you invest your money and the types of investments you put your money into all determine your portfolio composition and the returns that it generates.

Rather than comparing your portfolio performance with other investors, focus on whether the current composition of your portfolio is moving you closer to the financial goals you want to achieve, and invest accordingly.

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Determining the level of risk you're comfortable with as an investor is a thought exercise that should take place throughout your investing journey.

For example, the level of risk you're willing to take on might look very different as a newer investor than it will after you've been in the market for years. As you move closer to your retirement, you may find yourself leaning toward more conservative investments than you did earlier in your investing journey.

Know the level of risk you're comfortable with and use that baseline to help you determine the most appropriate investments for your portfolio, in addition to other determining factors like the underlying business, management, catalysts for growth, and so forth.

As time goes by, reassess your appetite for risk to ensure your current portfolio aligns with that baseline or whether you might need to adjust the balance of your holdings.

Habitual investing is key to growing your portfolio, but you should never invest all of the cash that you have on hand. You need to make sure that you're putting cash toward other elements vital to your financial health, such as your emergency fund.

Never invest cash that you think you're going to need over the next few years. If you do invest cash that you think you might have to cash out again in the near term, you might end up having to do just that and risk serious losses to your portfolio.

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Presented by Motley Fool Stock Advisor
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If you're brand new to investing in stocks, you've likely dealt with your fair share of emotional ups and downs in recent months. And even if you're a seasoned investor, no one is completely immune to the heightened emotions that a prolonged period of market volatility can induce.

Does that mean that stock investing is dead? Certainly not.

Volatility in the market is unavoidable. While there are a range of unique factors that have driven the ups and downs investors have witnessed in recent months, this doesn't negate the value of investing (and staying invested) in fantastic businesses that can deliver and compound meaningful returns to your portfolio over a period of years.

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