Free for 90 days: Sign up now and get 90 days managed free after your first deposit. See offer details

Coming soon: our new one-on-one advice packages. Learn more

Now available: our new one-on-one advice packages. Learn more

Get your entire Smart Saver balance managed free for 3 months. Enroll today

Get your entire Smart Saver balance managed free for 6 months. Enroll today

Introducing Smart Saver: You could earn 1.83% with our low-risk investing account for your extra cash.* Learn more

Investing Basics

Avoiding the Most Common Investment Pitfalls

The New York Times recently published an interesting item on their "Bucks" blog discussing the ten most common mistakes investors make, courtesy of Jerry Miccolis, the co-author of Asset Allocation for Dummies. It's a solid list; many people do fall into the traps he names. But, at the same time, we feel that, for the most part, they're avoidable if you take the right approach.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: November 15, 2010

The mistakes Miccolis highlights fall into a few categories, the first one being portfolio building: allocation, diversifying, and balancing investments. These decisions can be difficult to make and maintain on one’s own. What we’ve created at Betterment is a platform that does all this automatically, so you can use your time, energy, and quantitative skills on other things. Like sudoku. Or doing your taxes (something we unfortunately can’t make any less of a headache).

Don't be like her.
Don’t be like her.
 

The second category of mistakes centers around age-old “I can beat the odds” hubris. Miccolis cautions readers against letting their emotions dictate their investing, “chasing performance,” and “trying to outsmart the market.” Here’s the thing about investing: as the adage goes, a watched pot never boils. Investors who try to take their pot of money on and off the flame (go with us on the analogy here) end up with a lukewarm outcome. That’s why we feel the “set it and forget it” approach, by which you’re less likely to make whimsical changes in your investments, makes the most sense for long-term investors.

Miccolis has a few other points, which you should definitely check out. And while we feel it’s important to identify potential areas where you could get off track with money management, perhaps even more useful would be tips on how to avoid falling into these traps. We’ve identified our own list of money management mistakes you might encounter, and over the next couple of weeks, we’ll be bringing you installations from our guide on how to avoid them. Keep an eye out for these upcoming posts, and in the meantime, let us know your favorite investment tips in the comments, or on Facebook or Twitter.

Recommended Content

View All Resources
Betterment’s Approach to Financial Advice: An Overview

Betterment’s Approach to Financial Advice: An Overview

Achieving your financial goals is only possible if you plan effectively. Saving enough, choosing the right accounts, deciding when you can buy a house or when to retire—all of these are essential decisions even before you build an optimal portfolio.

How’d the Market Do? That’s Harder To Answer Than You Think

How’d the Market Do? That’s Harder To Answer Than You Think

In taxable investing, your after-tax return—the amount you “take home”—is what’s important. Yet far too many investors focus on market performance. Let’s look at the difference.

Why the Turbulence in the Stock Market?

Why the Turbulence in the Stock Market?

Nobody has all the answers to why the market takes a nosedive, but it’s often useful to take a look at the economic precursors that may play a role in early-2018 market turbulence.

How would you like to get started?

Your first step toward a smarter investing future starts here.

Create a Betterment account

Go ahead and join the smart, modern way to invest.

See what we can do for you

Tell us a bit about yourself, and we'll show you the benefits of investing with us.

Get a free investing checkup

Help us get a sense of your investing approach and see how you could improve.

Transfer a 401(k) or an IRA

Move an existing retirement account into a Betterment IRA.

Download the mobile app

Enjoy the Betterment experience anywhere on the go.

Search our site

For more information and disclosures about the Betterment Resource Center, click here. | See our contributors.