Top 8 Investment Mistakes Investors Should Avoid to Learn to Earn

Thinking about starting your investment journey but feeling a little nervous? You are not alone. Many beginners start investing with great excitement but end up making some common mistakes that cost them money and confidence.

The truth is, investing is not about luck. It is about smart choices, patience and knowing what to avoid. If you want to learn to earn, then understanding these mistakes is the first step toward a smoother and more successful journey.

Here are the eight most common investment mistakes new investors make and how you can avoid them.

1. Not Doing Enough Research

One of the most common mistakes beginners make is putting money into something they do not fully understand. If you do not know the basics of what you are investing in, the risks involved or how it might grow in the future, then you are not really investing you are just guessing. And guessing with your hard-earned money is like gambling, where the chances of losing are high.

Imagine you buy shares of a company just because you like its products or you saw many people talking about it online. You feel confident because you have seen the brand in stores or advertisements. But a few months later, you find out that the company has been losing money for years and has a huge amount of debt. Because of this, the share price falls sharply and the value of your investment drops too. You feel shocked and wish you had checked the company’s health before buying its shares.

To avoid such surprises, it is important to do some homework before investing. This can mean checking the company’s financial reports, understanding the industry it works in and thinking about the challenges it may face in the future. When you take the time to learn to earn before putting your money in, you give yourself a much better chance of protecting your money and making it grow.

One survey found that around 65% of Indian households investing in individual stocks don’t own any bonds or mutual funds, a sign they may not be balancing or researching properly. NBER

Skipping basic checks like reviewing financial performance and debt levels is like buying a car without checking its engine. It may look good, but you risk breakdowns (financially and literally).

Tip: Always study company reports, industry trends, and challenges. Informed investing grows wealth and confidence.

2. Following the Crowd Blindly

Many people believe that if everyone is buying a certain stock, cryptocurrency or investment scheme, it must be a good idea for them too. But just because a lot of people are talking about it does not mean it is the right choice for you. Sometimes, when too many people start buying the same thing, the price goes much higher than it is actually worth. By the time you decide to join in, the best time to buy is already over.

The number of Demat accounts in India grew from about 4 crore in 2020 to over 15 crore in 2024. That means millions of new people started investing in just five years. Business India
When certain stocks become popular, especially small company stocks, many new investors rush to buy them. But if they join too late, the price often falls soon after and they end up losing money.

Tip: Focus on your financial goals, not social hype. Do your own due diligence before investing.

3. Ignoring Diversification

Putting all your money into a single investment is risky because if that one thing goes wrong, your entire savings will be affected. 

Imagine you spend all your money opening a shop that sells only one product like winter jackets. Business might be great in the cold months, but the moment summer arrives, sales drop sharply and your income suffers. In investing, the same thing can happen — if you rely on just one stock or one type of asset, a single bad turn can undo years of progress.

As per ResearchGate, small-cap stocks gave an average return of about 18.7% a year, which is more than the 12.4% from big-company stocks. But they also move up and down in price much more. In bad times, small-cap stocks have fallen by nearly half, while big-company stocks have dropped by about one-third.

It’s like putting all your eggs in one basket. If that basket falls, all the eggs can break.

4. Trying to Time the Market

A lot of people who are new to investing think they can magically guess the exact moment when the market will be at its very lowest or its very highest. They imagine they will buy at the lowest price and sell at the highest price, making lots of money. But in real life, even the smartest and most experienced investors almost never get this perfect.

As per J.P. Morgan , if you missed just the 10 best days in the S&P 500 over the last 20 years, your yearly returns could drop from about 9–10% to only around 5–6%. If you missed more good days, the returns would be even lower. Kiplinger 

This shows that trying to guess the exact best days to buy or sell is almost impossible.

Tip: Invest steadily (like via SIPs) and stay in the market time matters more than timing.

5.  Letting Emotions Control Your Decisions

When it comes to investing, our feelings can sometimes become our biggest enemy. Two of the strongest feelings are fear and greed. Fear makes us panic and sell quickly when prices fall. Greed makes us rush to buy more when prices are going up, hoping to make quick money. Both can lead to big mistakes that hurt our savings.

Emotional investing is when we let these feelings control our decisions instead of thinking calmly. This often means buying shares when prices are very high and selling them when prices are low, which is the opposite of what actually helps money grow.

As per SEBI, 91% of individuals who traded in derivatives in 2024–25 lost money, even after new rules were put in place. This shows how fear and greed can badly affect investment decisions. The Times of India

When people get scared, they often sell at low prices. When they get greedy, they buy at very high prices. Both actions are the opposite of what actually helps money grow.

6. Investing in Penny Stocks 

Penny stocks are shares of very small companies that cost very little money, sometimes less than a packet of chips or a chocolate bar. Because the price is so low, many beginners think, Wow! If I buy now, it could go up and I’ll make a lot of money! It sounds like a small risk with a big reward.

But here’s the truth: penny stocks can be extremely risky. Their prices can change very quickly one moment they are up, the next moment they crash down. And because these companies are usually very small and not well-known, they don’t have a strong history 

Penny Stock Example: Mishtann Foods

Mishtann Foods, a small company from Gujarat whose shares were very cheap (called a penny stock), suddenly became very popular and many people started buying it. But then SEBI took action against the company. As soon as this news came out, the share price fell sharply around 36% in just two days and got stuck at about ₹9.94 per share, meaning no one was willing to buy it at a higher price. Business Today ABP New

In those two days, the stock price fell by about one-third. And if you count three days in a row, the total fall was over 43%, bringing the price down to roughly ₹8.95 per share.

 SEBI accused Mishtann Foods and its owners of suspicious money dealings and using company funds in the wrong way. They sent the company a notice and put limits on its share trading. This scared investors, so they started selling the shares quickly, which made the price crash even more.

7. Overlooking Fees and Charges

Whenever you invest your money, whether it is in shares, mutual funds, or any other product, there are always some costs involved. These costs can have different names like brokerage fees, annual charges, or transaction fees. They may look small at first, but if you ignore them, they can quietly reduce the profit you make, just like small drops of water can slowly fill a bucket.

For example, imagine you invest ₹1,00,000 in a mutual fund and the fund charges 2 percent every year. That means ₹2,000 is taken from your investment each year as fees, no matter if the fund makes you a profit or not. You might think ₹2,000 is not a big deal, but if you keep the investment for many years, this amount is cut again and again, and over time it becomes a large sum. This is money that could have stayed with you.

8. Having Unrealistic Expectations

Some people start investing thinking they will become rich very quickly. They expect to put in a little money today and get a huge amount back in just a few months. This sounds exciting, but in reality, it usually leads to risky choices and a lot of disappointment.

Let’s say you hear a story about someone who invested ₹50,000 and turned it into ₹5 lakh in a short time. You feel, If they can do it, so can I! So, you take big risks, hoping for the same result. But instead of growing your money, you may lose a big part of it, because the market does not always go the way you expect.

Data shows that up to 70% of intraday traders in India lost money between 2019 and 2023, with many being under 30 and highly active which is evidence that quick-rich hopes often lead to loss. Reuters 

Conclusion

In the end, investing isn’t about being right all the time. It’s about avoiding big mistakes, learning from small ones and staying consistent. If you can keep emotions in check, manage risks and stick to a clear process, your chances of long-term success go up a lot.

If you’re looking for structured guidance, our Value Investing course can help you learn how to read financial statements, find undervalued companies and make informed decisions. These skills can go a long way in helping you avoid the mistakes we discussed above.

FAQs

1. What are the most common mistakes new investors make?

New investors often fall into traps like not conducting thorough research, following the crowd without understanding the investment and neglecting diversification. 

2. How can I avoid emotional investing decisions?

To prevent emotional decisions, it’s crucial to maintain a long-term investment strategy, avoid checking your portfolio too frequently and focus on your financial goals rather than short-term market fluctuations. 

3. Why is diversification important in investing?

Diversification helps spread risk by investing in different asset classes, sectors or geographical areas. This approach reduces the impact of a poor-performing investment on your overall portfolio.

4. What is market timing and why should I avoid it?

Market timing involves attempting to buy low and sell high by predicting market movements. It’s challenging to execute successfully and can lead to missed opportunities or losses.

5. How do fees and charges affect my investment returns?

Fees and charges, such as brokerage fees and fund management costs, can erode your investment returns over time. It’s essential to understand and compare these costs before investing.