Stock prices in practically all the major markets across the world have been registering rapid gains in the recent past. The US benchmark S&P 500 Index has gone up by almost 20% in the past year and by 87% in the last five.
Tech stocks like Amazon, Apple, and Alphabet, Google’s parent company, have been rising even faster. If you had bought into the market several years ago and stayed invested through the boom, you would have made a handsome profit.
In a bull market like we have seen in recent years, investors can seemingly do no wrong. However, there is a downside to consistently rising share prices as this often gives investors the illusion that they have the “Midas touch” when it comes to their investment portfolios. They attribute their gains to their investing acumen, rather than the robust performance of the broader market. Furthermore, they become over-confident and complacent, expecting to make a profit on every purchase.
It’s important to remember, though, that making money in a bull market doesn’t make you an investment expert.
Do-it-yourself (DIY) investing – when you manage your portfolio by yourself without the help of a wealth management professional – can be a minefield.
Many investors opt to take the DIY route – and this is fraught with difficulties and dangers. As a DIY investor, there is a possibility that the strategy that you adopt could be fundamentally flawed, and the mistakes that you make could prove very expensive to rectify.
Here we take a look at some of the most common mistakes that DIY investors make.