Five Common Investing Mistakes I Try to Avoid
January 31, 2023
The biggest investing mistakes aren’t always complicated. Often, they’re ordinary decisions made with an unrealistic expectation: that we can pick the perfect moment, finish a project for less than it really costs or earn an exceptional return without taking exceptional risk.
In my January 2023 video, I picked out five mistakes I see repeatedly. They apply across property and other investments, although the way they show up can be different. I’ve made some of them myself, particularly when estimating refurbishment costs, so this isn’t a list written from a position of perfection.
What I want is a process that makes these mistakes less likely and leaves enough room to cope when something still goes wrong. A good investment plan shouldn’t depend on getting every forecast exactly right.
You can also watch my original video on the biggest investing mistakes.
Mistake one: trying to time the market perfectly
It’s very tempting to wait for the ideal moment. You want to buy just before prices rise and avoid buying just before they fall. The difficulty is that the turning points look much clearer afterwards than they do when you’re making the decision.
My preference is to build a repeatable investing habit rather than make the whole plan depend on a prediction. In the video, I explained that I put a set amount into my ISA, pension and investment account each month, based on the budget I’d established for the year.
That doesn’t guarantee a profit or remove the possibility of buying before a fall. It spreads the timing of purchases and reduces the pressure to identify one perfect entry point. The process is something I can control; the next market movement isn’t.
I used a property illustration too. If I had £200,000 to invest over three years, I might divide the intended investment across those years rather than commit everything at one moment. That was an example of spreading decisions, not a recommendation that every investor should follow precisely that schedule.
Property is less divisible than an investment fund. You can’t always buy exactly one third of the property you want, and transaction costs matter. I still think the principle is useful: avoid turning one forecast into the foundation of your entire financial future.
Timing and price are different questions
Not trying to time the market doesn’t mean ignoring what you pay. I can be uncertain about next year’s prices and still investigate whether a particular property makes sense at today’s asking price.
I want to understand comparable sales, achievable rent, costs, condition and the likely work involved. Those are practical questions about the investment in front of me. They’re different from claiming to know exactly when the whole market will reach its low point.
Sometimes the right decision is to pass because the numbers don’t work. Sometimes it’s to proceed because the purchase fits the plan and leaves a sensible margin. Neither decision needs a dramatic prediction about what every other property will do.
My article on buying property below market value looks at assessing the price of a deal. A discount only helps if the underlying value and the rest of the calculation are credible.
Mistake two: expecting a long-term investment to deliver immediately
My approach centres on thinking in years and decades. In the video, I discussed public markets and property as the main places I look for long-term wealth building and income. That is my investment preference, not a complete list of every possible asset.
The attraction is owning something with an underlying economic purpose. A company can earn profits, and a rental property can provide accommodation that tenants pay for. There is a basis for assessing income and costs beyond hoping somebody will pay more tomorrow.
That doesn’t make either investment risk-free or entirely effortless. Companies can struggle, dividends can change and properties can have voids or expensive repairs. Using a letting agent can reduce day-to-day work, but the owner still carries responsibilities and financial risk.
Thinking long term helps me avoid putting impossible pressure on the first year. If I need an investment to transform my finances immediately, I’m more likely to accept weak evidence or take risks that don’t really suit me.
I’d rather ask what a realistic, sustained process could achieve and whether I can keep following it. The timetable should reflect the capital available and the contributions I can make, rather than the date I’d ideally like to be wealthy.
Mistake three: underestimating refurbishment costs
This is the mistake I’ve experienced directly. In the video, I described a Corby property bought for £116,000. I’d expected the refurbishment to cost roughly £30,000, but it ended up at about £42,000 after more work became necessary.
Additional windows and rewiring were part of the explanation. Once you open up a property and begin the work, you can discover things that weren’t fully reflected in the original estimate. A few extra requirements can become a substantial overspend.
I discussed an eventual value in the region of £200,000 or more, using £200,000 as the cautious illustration. That meant there was room in that particular deal for the extra spending. It doesn’t mean the overspend didn’t matter or that another project would recover in the same way.
A £12,000 increase in costs can remove much of a smaller project’s expected margin. If the original calculation was purchase £100,000, works £30,000 and resale £150,000, there was only a £20,000 gap before other costs even began. Raising the works to £50,000 uses that whole gap.
That simple example is why I want the full calculation rather than a headline difference between purchase and finished value. Acquisition costs, finance, holding costs and selling costs still have to be paid. The gap isn’t automatically profit.
Complexity and time make the cost problem bigger
The more parts you change, the more opportunities there are to uncover another problem. A new kitchen might reveal electrical work. A changed layout might affect plumbing or other requirements. The budget needs to reflect the actual scope rather than the appearance you’re hoping to achieve.
Time matters as well. A project that takes longer can incur more finance and holding costs. It may also be exposed to changing labour or material prices. An overspend and a delay can happen together, so testing them separately may understate the pressure.
I’d want a clear specification, realistic quotations and a contingency that remains available. A contingency isn’t money already allocated to optional improvements. It has a different purpose: dealing with the uncertainty that remains after you’ve done the preparation.
The lesson isn’t to avoid every refurbishment. It’s to understand why the margin exists and how much of it could disappear. My property refurbishment mistakes article goes into the practical side of that assessment.
Mistake four: ignoring the full cost of fees
Fees can look small when they’re presented individually. The problem is their combined effect. With funds, there may be platform charges and investment charges. With property, there can be acquisition, finance, refinancing and management costs.
In the original video, I mentioned particular platform prices and borrowing rates available or familiar to me then. Those were historical examples. They aren’t current quotes, and I wouldn’t choose a provider today without checking its present charges and the terms that apply to the way I intend to use it.
For property, bridging finance was my example of how several charges can accumulate. Arrangement fees, interest, legal work and the eventual refinancing can all contribute to the total. Looking only at the advertised monthly interest rate can miss a significant part of the expense.
The useful comparison is the total cost over a realistic project timetable. If a deal’s margin is modest, a few extra months and another set of fees can take a large proportion of the expected return.
Paying a fee isn’t automatically a mistake. A good service can be worth paying for. The mistake is not understanding what you’re paying, what you receive and how the cost affects the result after everything is included.
Mistake five: chasing returns that don’t match the risk
An exciting return is a powerful sales tool. I understand why somebody would prefer the promise of 30% to a much more ordinary prospect. The question is what has to happen for that result to be achieved and what can happen instead.
In the video, I recalled being told about a cryptocurrency that was supposedly going to multiply dramatically over the following years. My reaction was to question the scale of the claim. If an extraordinary return could be repeated reliably, the implications would quickly become implausible.
That is different from saying nobody ever makes an exceptional gain. Some people do. The problem is treating a rare outcome, an optimistic projection or a lucky period as a dependable expectation for your own money.
I also discussed broad historical market returns. Those numbers depend on the index, dates, reinvestment assumptions, fees and currency used. They shouldn’t become a fixed annual promise or a minimum return in a personal plan.
The FCA’s golden rules of investing reinforce the need for realistic expectations and an understanding of risk. A higher target doesn’t create a higher reliable return simply because it would make the plan work better.
Leverage can magnify the result in both directions
Property can produce a large percentage change in equity because part of the purchase is funded by a mortgage. In the video, I illustrated a £200,000 property bought with £50,000 of investor money and a £150,000 loan.
If it later became worth £350,000 while the loan remained £150,000, the equity would be £200,000 before sale costs and tax. That is a large change compared with the original £50,000. But the increase is a hypothetical outcome, not a promise that a property will reach that value within a set period.
The same structure magnifies losses. Borrowing remains payable even if the property falls in value, and interest or refinancing terms can change the cash position. Leverage explains why the percentage return can be large; it doesn’t prove that the investment is safe.
I’d therefore keep the borrowing decision attached to the downside calculation. Can the income cover realistic costs? What if the valuation is lower? Is there enough accessible money to handle a problem without being forced into a poor sale?
Our compound interest calculator is useful for comparing different contribution habits and time horizons. I’d try a range of return assumptions rather than relying on one attractive outcome. Its steady-growth illustration is before tax and fees and can’t show the uneven path of real investment returns.
Build a process you can keep using
The five mistakes connect. Short-term expectations encourage market timing. An ambitious target can encourage unrealistic cost estimates. Ignoring fees makes a weak deal look stronger, and the desire for a spectacular return can make the risks easier to dismiss.
My response is to slow down the assumptions, not necessarily the whole investment journey. Use realistic costs, distinguish forecasts from results, understand fees and judge each decision against a longer-term objective. A plan that works with ordinary outcomes is more useful than one that depends on exceptional luck.
If you’d like to discuss your property investment approach, book a free 30-minute call. You can also explore the Starter Club or find out about Done For You.