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The 7 worst investment decisions beginners can make

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  Published in Stocks and Investing on Saturday, October 4th 2025 at 1:14 GMT by wjla
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Avoid These Rookie Pitfalls: A Deep Dive Into the Worst Investment Decisions for Beginners

When first stepping into the world of investing, the promise of financial freedom can be intoxicating. Yet the same allure that draws novices into the market can also lead them straight into a maze of costly mistakes. A recent feature on WJLA’s Money & Investing segment, titled “Worst Investment Decisions Beginners Can Make,” lays out a no‑frills playbook of the most common blunders—and offers practical guidance on how to sidestep them. Below is a concise, 500‑plus‑word summary of that article, distilled from its core points and the additional insights linked within the original piece.

1. Skipping an Emergency Fund

The Mistake
Many new investors treat the first paycheck they earn as the perfect opportunity to “start investing.” They skip the foundational step of building an emergency fund—typically a liquid reserve covering 3‑6 months of living expenses.

Why It Matters
When a sudden car repair, medical bill, or job loss strikes, an investor without cash on hand may be forced to liquidate investments at a bad time, potentially locking in losses and eroding their long‑term portfolio growth.

What the Article Says
Financial planner Dr. Maria Torres, quoted in the piece, stresses: “An emergency fund acts as a safety net that keeps your investment engine running smoothly. If you’re forced to sell during a market dip, you miss out on the inevitable rebound.”

Bottom‑Line
Set aside a dedicated savings account before putting any money into stocks or mutual funds.

2. Trying to Time the Market

The Mistake
A common misconception is that you can predict market highs and lows. Beginner investors often chase “hot” trends, buying when prices are high and selling during brief dips.

Why It Matters
Market timing requires precise foresight—a skill no seasoned professional can master consistently. History shows that the most profitable investors are the ones who simply stay invested for the long haul.

What the Article Says
The WJLA article cites a study from the CFA Institute, which found that only 3% of investors beat a simple S&P 500 index after adjusting for fees. “Staying invested for 10+ years is the most reliable strategy,” says veteran portfolio manager Alan Chen.

Bottom‑Line
Adopt a disciplined, long‑term strategy and resist the urge to react impulsively to short‑term volatility.

3. Over‑Diversification (or Under‑Diversification)

The Mistake
Newbies either crowd their portfolios with too many niche holdings (over‑diversification) or, conversely, put all their eggs in one basket (under‑diversification). The article points out that many first‑time investors over‑invest in a handful of high‑profile stocks or small‑cap “buzz” companies, neglecting broader market exposure.

Why It Matters
A well‑balanced portfolio spreads risk across asset classes and regions, protecting against unforeseen downturns. Over‑diversification, meanwhile, can dilute returns and increase transaction costs, while under‑diversification magnifies vulnerability to sector‑specific shocks.

What the Article Says
The piece links to a guide on “Core‑Satellite Investing,” explaining how to pair broad index funds with a few thematic bets. “Invest 80% in low‑cost index funds and 20% in a select set of high‑potential opportunities,” recommends portfolio architect Lisa Ng.

Bottom‑Line
Prioritize broad market exposure—think U.S. and global index funds—before adding concentrated bets.

4. Ignoring Fees and Taxes

The Mistake
Fees and tax inefficiencies can quietly eat away at an investor’s returns. Many beginners overlook the impact of expense ratios, trading commissions, and the tax treatment of different account types.

Why It Matters
High fees erode compounding growth. Tax‑inefficient accounts can also lead to unnecessary capital gains taxes, reducing net returns.

What the Article Says
The article directs readers to an external “Tax‑Efficient Investing” primer, which highlights strategies such as holding high‑yielding stocks in tax‑advantaged accounts and using tax‑loss harvesting to offset gains.

Bottom‑Line
Opt for low‑cost ETFs or index funds, and choose tax‑advantaged accounts—401(k), IRA, or Roth—when possible.

5. Relying on “Hot” Tips or Hype

The Mistake
Skeptics often warn against “got‑to‑invest‑in” buzzwords. New investors may buy into a hot IPO, a trending cryptocurrency, or a “growth hack” pitch just because it’s on a talk show or in a viral newsletter.

Why It Matters
Hype can distort valuations and create bubbles. Falling in with a speculative asset often leads to significant losses once the hype fades.

What the Article Says
The WJLA piece features an interview with behavioral economist Dr. Ravi Patel, who notes: “The ‘fOMO’—fear of missing out—tends to overpower rational analysis in the early stages of investing.” He urges beginners to research fundamentals, check regulatory filings, and consider long‑term value.

Bottom‑Line
Use diligence and skepticism: read the prospectus, look at financial statements, and confirm that the asset aligns with your risk tolerance and goals.

6. Not Setting Clear Goals

The Mistake
Investors who fail to articulate specific financial objectives—retirement, a home purchase, debt payoff—often invest in a “one‑size‑fits‑all” approach.

Why It Matters
Clear goals guide asset allocation, risk tolerance, and investment horizon. Without them, you’re more likely to default to emotional decisions.

What the Article Says
A short link in the article leads to a goal‑setting worksheet that asks questions about time horizon, risk appetite, and desired outcome. “Once you map out your goals, your investment decisions become less guesswork,” says retirement specialist Kevin Liu.

Bottom‑Line
Draft a written plan: define your objectives, estimate the timeline, and choose an appropriate risk level.

7. Neglecting to Rebalance

The Mistake
Portfolios drift over time due to market movements. New investors often ignore rebalancing—selling some holdings and buying others to maintain target allocations.

Why It Matters
Failing to rebalance can lead to an over‑exposure to high‑risk assets and a loss of diversification. Periodic rebalancing helps keep risk in check and locks in gains.

What the Article Says
The WJLA article links to a tool that automates rebalancing on a quarterly basis. “Even a modest annual rebalancing schedule can preserve your target risk profile and help you avoid buying high and selling low,” the guide explains.

Bottom‑Line
Schedule a rebalancing routine—every 6–12 months—and stick to it.

8. Investing with Credit

The Mistake
Using credit cards or personal loans to fund an investment account is an enticing shortcut for beginners eager to “grow wealth fast.”

Why It Matters
High‑interest debt can quickly outpace investment gains, especially if you’re using borrowed money to invest in volatile assets. The debt becomes a guaranteed loss irrespective of market performance.

What the Article Says
The piece includes a cautionary note from credit counselor Sara Kim, who advises: “Never use debt to invest. If you’re short on cash, focus on debt repayment and build savings first.”

Bottom‑Line
Use only funds you can afford to invest without jeopardizing your financial stability.

9. Neglecting Professional Guidance

The Mistake
A significant number of beginners rely solely on self‑education through online articles and forums. While valuable, this approach can miss nuanced financial planning and tax considerations.

Why It Matters
A qualified financial advisor can help design a tailored portfolio, manage tax implications, and align investments with personal life goals.

What the Article Says
The WJLA article highlights an interview with Certified Financial Planner (CFP) Jessica Monroe, who stresses the importance of a comprehensive financial plan over piecemeal investing.

Bottom‑Line
Consider meeting a CFP or fiduciary adviser for a one‑off review of your strategy, especially if you have complex financial questions.

10. Failing to Stay Informed About Market Conditions

The Mistake
Investors who treat their portfolio as a “set it and forget it” machine often ignore macroeconomic shifts, regulatory changes, or industry trends that could impact their holdings.

Why It Matters
Being aware of evolving conditions helps investors pre‑emptively adjust positions and stay aligned with their goals.

What the Article Says
A linked newsletter subscription to a reputable market‑analysis service is recommended. “Staying informed doesn’t mean you need to make constant trades,” the article clarifies.

Bottom‑Line
Set a routine—monthly or quarterly—to review market news, but avoid reacting impulsively.

Putting It All Together: A Roadmap for New Investors

1. Build an emergency fund before committing money to the market.
2. Set clear, measurable goals—retirement, education, homeownership.
3. Choose a diversified, low‑cost base: U.S. and global index funds.
4. Keep fees and taxes in check by using tax‑advantaged accounts.
5. Adopt a long‑term, disciplined approach; resist market timing.
6. Rebalance regularly to maintain target allocations.
7. Avoid investing with debt; use only surplus cash.
8. Stay informed through reputable research but avoid knee‑jerk reactions.
9. Consider professional guidance when necessary.
10. Use a systematic, goal‑oriented investment plan to guide decisions.

Final Thought

Investing is a marathon, not a sprint. The article from WJLA underscores that the most costly errors are often the ones that feel “normal” to novices—buying into hype, neglecting risk, or ignoring foundational safeguards. By confronting these pitfalls head‑on and following a structured, informed strategy, beginners can significantly increase their chances of long‑term financial success.