Investing for the first time can feel overwhelming, especially with potential changes to ISA allowances and market volatility. To help new investors navigate the pitfalls, financial experts reveal the most common mistakes—and how to avoid them.
1. Overlooking Fees That Eat Into Returns
Whether you choose a managed fund or a DIY investment account, fees can significantly impact long-term gains.
Management fees (typically 0.5%–1.5% annually)
Trading commissions (per buy/sell transaction)
Platform charges (for holding investments)
Laith Khalaf, AJ Bell:
“Small fees may seem insignificant, but over decades, they can cost thousands. Cheap isn’t always best, but cost-efficiency matters.”
🔗 For fee comparisons: Morningstar Fund Fee Study
2. Failing to Diversify Your Portfolio
Putting all your money into a few familiar stocks (like UK companies) increases risk.
How to diversify:
Limit single stocks to ≤5% of your portfolio (Khalaf)
Invest in index funds (e.g., S&P 500 tracker)
Consider global funds (but check regional exposure)
Alan Barral, Quilter Cheviot:
“A UK-only portfolio misses global growth opportunities and is vulnerable to local downturns.”
⚠️ Warning: Some “global” funds are 70%+ U.S.-weighted (e.g., MSCI World Index).
3. Investing a Lump Sum All at Once
Susannah Streeter, Hargreaves Lansdown:
“Drip-feeding investments (pound-cost averaging) reduces risk from sudden market drops.”
Why it works:
Buys more shares when prices are low
Lowers average entry cost
Avoids bad timing on volatile days
4. Trying to Time the Market
With political shifts (tariffs, elections) and economic uncertainty, even professionals struggle to predict highs and lows.
Khalaf:
“Market timing is like catching a falling knife—you might succeed, but you’ll probably get hurt.”
Barral’s rule:
Keep a cash buffer for downturns
Avoid frequent portfolio tinkering (increases costs)
🔗 For long-term strategies: Vanguard’s Investor Research
5. Chasing Past Performance
Just because a stock (or sector like AI or EVs) did well recently doesn’t guarantee future success.
Jason Hollands, Bestinvest:
“Investing based only on past performance is like driving while staring at the rear-view mirror.”
Streeter’s advice:
Research how a company makes money
Assess future risks/opportunities (not just past wins)
Key Takeaways for New Investors
✅ Minimize fees – Compare platforms/funds
✅ Diversify globally – Avoid overexposure to one market
✅ Invest gradually – Use pound-cost averaging
✅ Ignore market noise – Focus on long-term goals
✅ Research before buying – Past success ≠ future return
