Seven Deadly Sins of Private Investors

Fidelity have released what they call the “Seven Deadly Sins of Private Investors“:

  1. Trying to time the markets: Waiting for the perfect moment to invest may sound like a good idea, but it is impossible to be sure how the markets are going to move. If an investor has decided a particular fund is right for them, they should go ahead and invest. This is the best way to ensure they benefit from the days when the markets make the biggest gains.
  2. Being distracted by recent performance: Past performance is not a guide to future returns, a warning all investors are familiar with. Performance figures should be treated carefully – good returns over six months could be down to good luck, while lacklustre results may be just a bad patch. Investors should look back over several years, perhaps as far as the current manager has been in the job. And check out all the manager’s funds, not just the one that’s being considered for an investment.
  3. Investing with no plan: Many people start investing when they realise how important it is to save for the future, but they don’t necessarily take the time to think about the best way to achieve their goals. The secret of successful investing is devising a plan and sticking with it over the years.
  4. Focusing only on charges: While charges do make a difference to the returns of the fund, the fund with the lowest charges is not necessarily the right choice. Charges are only one of the things to consider. It can also help to see how a fund manager chooses investments and what sort of service the company provides. Paying a little extra may bring extra benefits.
  5. Duplicating investments: Diversification is key to investing – a range of sectors and regions enables risk to be spread. But a variety of different funds does not mean that diversification has been achieved- funds may invest in similar companies or have a disproportionate focus on one area.
  6. Failing to review: Making an investment is just the first step towards securing the financial future. It is just as important to review holdings as often as possible. Questions that should be considered include: Is it affordable to invest more? Is the combination of investments still appropriate to time-lines and goals? and Does the portfolio still reflect the original plan?
  7. Trusting the future to cash: While deposit accounts are very secure, this security comes at a price. Returns on cash are much lower than what could potentially be achieved from a fund that invests in shares. Part of the problem is inflation, which eats into the value of any long-term investment. Relying on a deposit account could mean ending up with less money than is needed.

Do these ring any bells to you?

One thought on “Seven Deadly Sins of Private Investors

  1. Excellent article!
    It is clear people are not conducting reviews often enough, particularly for their Investments and personal pension funds.
    Many have been in the same funds for some considerable time, and do not recieve advise, or adequate information from their providers. This will lead to under-performance, that could be avoided if suitable reviews of the investment performance was carried out.
    There is a widespread view that clients are looking for more online information in this area, and my website at is in the process of being set up to offer a solution to this problem.
    The site will be going live next month, so watch this space, and bookmark the site.

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