Mistakes Are Expensive. Learning From Other People’s Mistakes Is Free.
Everyone makes investing mistakes. I’ve made them. You’ll probably make some too. The goal isn’t to be perfect — it’s to avoid the big, portfolio-killing errors that set beginners back years.
What follows are the seven most common mistakes I see new ETF investors make. Not obscure edge cases — the everyday blunders that happen over and over because they feel intuitive even though they’re destructive.
Some of these will seem obvious. Do them anyway and your future self will thank you.
Mistake #1: Waiting for the “Right Time” to Invest
This is far and away the most costly mistake, and nearly every beginner makes it.
The logic seems sound: “The market is at an all-time high. It must come down soon. I’ll wait for a dip and buy cheaper.”
Here’s the problem: the market is at or near an all-time high roughly 30% of all trading days historically. All-time highs aren’t rare events — they’re the natural outcome of a market that trends upward over time. If you wait for a pullback every time the market hits a new high, you’ll spend most of your investing life on the sidelines.
Schwab ran a study comparing five investing strategies over various 20-year periods:
- Perfect timing — Investing at the absolute bottom each year (impossible in practice)
- Immediate investing — Investing the lump sum on January 1st each year
- Dollar-cost averaging — Spreading investments over 12 months
- Bad timing — Investing at the absolute peak each year
- Never investing — Keeping everything in cash
The results? Immediate investing came in second, behind perfect timing (which is impossible). Even bad timing — investing at the worst possible moment every year — dramatically outperformed staying in cash.
The cost of waiting is almost always higher than the cost of imperfect timing. Time in the market matters more than timing the market. This isn’t a platitude — it’s backed by decades of evidence.
The fix: Invest when you have the money. If a lump sum feels scary, use dollar-cost averaging. But don’t sit in cash waiting for a crash that may not come for years.
Mistake #2: Checking Your Portfolio Too Often
When you first start investing, the urge to check your portfolio hourly is overwhelming. You refresh your brokerage app on the bus, during lunch, before bed. Every dollar of movement — up or down — triggers an emotional response.
This is a problem because:
Markets move every day. On average, the S&P 500 moves at least 0.5% up or down on any given day. Over the course of a month, you might see 15 green days and 10 red days. Over a year, there will be stretches where your portfolio drops 5-10% before recovering.
Loss aversion is real. Psychological research shows that the pain of losing $100 is roughly twice as intense as the pleasure of gaining $100. If you check daily, you’ll experience that loss pain roughly as often as gain pleasure — even in a year when the market finishes up 15%. The frequent checking trains your brain to associate investing with anxiety.
It leads to action. And in investing, unnecessary action is the enemy. People who check daily are more likely to sell during dips, chase hot sectors, or tinker with their allocation. Every one of those actions tends to hurt returns.
The fix: Check your portfolio quarterly. Not monthly. Not weekly. Four times a year. Set a calendar reminder and stick to it. Between check-ins, live your life. Your VTI shares don’t need babysitting.
If you genuinely can’t resist checking, at least commit to a rule: no trades on the same day you check. Force a 24-hour cooling-off period before any action.
Mistake #3: Selling During a Market Crash
This is the big one. The mistake that turns temporary dips into permanent losses.
Every market crash follows the same emotional arc for beginners:
- Market drops 5%. “I’m fine. This is normal.”
- Market drops 15%. “This is uncomfortable, but I know I should hold.”
- Market drops 25%. “This feels different. Maybe I should sell and wait for the bottom.”
- Market drops 30%+. Panic. Sell everything.
- Market recovers 20%. “I’ll wait for it to dip again before buying back.”
- Market fully recovers. “It’s too expensive now. I missed it.”
The investor who sold at step 4 locked in their losses and missed the recovery. The investor who did nothing — literally nothing — ended up profitable.
Dalbar Inc. publishes an annual study showing that the average equity fund investor earns significantly less than the market itself. Over the 20-year period ending in 2023, the S&P 500 returned about 9.7% annually. The average investor earned about 6.8%. That 2.9% gap is almost entirely due to buying high and selling low — driven by emotional decision-making.
The fix: Before you invest, write down this statement and save it somewhere you’ll see during a crash: “I will not sell during a market downturn. Every crash in history has been followed by a recovery. My time horizon is [X] years, and this is a temporary event.”
Having a written plan — decided when you’re calm — makes it much harder to panic when the market is on fire.
Mistake #4: Owning Too Many ETFs That Do the Same Thing
I’ve seen portfolios like this:
- VTI (total US market)
- VOO (S&P 500)
- SPY (also S&P 500)
- IVV (also S&P 500)
- SCHX (large-cap US stocks)
- ITOT (total US market)
This person owns six ETFs and thinks they’re diversified. They’re not. They basically own the same 500 companies six times over. That’s not diversification — it’s redundancy.
The overlap between VTI and VOO is about 85%. The overlap between VOO, SPY, and IVV is essentially 100%. Adding more broad US ETFs doesn’t improve diversification one bit.
True diversification means owning different asset classes and geographies:
- US stocks + International stocks → Geographic diversification
- Stocks + Bonds → Asset class diversification
- Large-cap + Small-cap → Size diversification
Three thoughtfully chosen ETFs (VTI + VXUS + BND) provide more genuine diversification than ten overlapping US stock ETFs.
The fix: Before adding any ETF, check what you already own. If the new ETF has 80%+ overlap with an existing holding, it’s not adding value. Use tools like our ETF Portfolio Analyzer to visualize overlap.
Mistake #5: Chasing Last Year’s Winners
Last year QQQ returned 25%. So you pile in. Then tech stumbles and your money sits underwater for two years. Meanwhile, the value stocks you ignored quietly outperform.
This pattern — buying what just went up and avoiding what just went down — is called performance chasing, and it’s the most reliable way to buy high and sell low.
Markets tend to mean-revert. Sectors that outperform for a few years often underperform for the next few years, and vice versa. The technology sector dominated the late 2010s but lagged in 2022. Energy stocks were terrible from 2015-2020 but surged in 2021-2022.
Here’s what the data shows: Morningstar regularly tracks investor returns versus fund returns. The typical investor underperforms the very funds they invest in by 1-2% per year, primarily because they buy after a fund has performed well and sell after it has performed poorly. They chase performance, arriving late and leaving early.
The fix: Pick a diversified allocation that makes sense for your goals. Stick with it regardless of what sector is “hot.” Rebalance annually. The temptation to chase winners will always be there — resist it.
Mistake #6: Ignoring Expense Ratios
“It’s only 0.75%. That’s less than 1%. How bad could it be?”
Over 30 years on a $50,000 investment, pretty bad. As we’ve covered in our expense ratio deep dive, the difference between a 0.03% ETF and a 0.75% ETF can cost you over $50,000 in lost returns to fees.
The most common way beginners end up in expensive funds:
- 401(k) plan offerings. Many employer plans only offer high-cost mutual funds. If your plan includes an index fund, use it. If not, consider contributing only enough to get the employer match, then investing additional savings in a low-cost IRA.
- Financial advisor recommendations. Some advisors earn commissions on fund sales and may recommend expensive funds. Ask what the expense ratio is before investing.
- Brand-name active funds. Funds with famous managers or catchy names (like ARKK at 0.75%) charge premiums for their brand. Whether they deliver enough extra performance to justify the fee is statistically unlikely.
The fix: For core holdings, stick with expense ratios under 0.10%. For satellite positions where you’re making a deliberate bet, up to 0.35% can be reasonable. Above that, you should have a very strong reason.
Mistake #7: Not Investing at All
This is the most expensive mistake of all — and it’s one you make by doing nothing.
The cost of staying in cash is invisible. You don’t see a statement showing ”-$8,000 from not investing.” But the opportunity cost is very real.
If you kept $20,000 in a savings account earning 1% instead of investing it in a total market ETF averaging 8%:
| Year | Savings Account | Invested in VTI | Difference |
|---|---|---|---|
| 5 | $21,020 | $29,400 | -$8,380 |
| 10 | $22,090 | $43,200 | -$21,110 |
| 20 | $24,400 | $93,200 | -$68,800 |
| 30 | $26,970 | $201,250 | -$174,280 |
In 30 years, the difference between “I’ll get around to it” and actually investing is $174,280. On a $20,000 initial investment. That’s money that simply evaporated because you never clicked “Buy.”
I get why people don’t invest. It feels risky. The market seems complicated. There’s always a reason to wait. But not investing has its own risk — the risk of your money losing purchasing power to inflation every single year while the market compounds without you.
The fix: Start today. Not tomorrow. Today. Open a brokerage account, buy one share of VTI, and set up automatic investing. Make the decision once. Then let autopilot do the rest.
The One Mistake That Connects All the Others
If you look at all seven mistakes, they share a common root: emotional decision-making.
- Waiting for the right time? Fear of loss.
- Checking too often? Anxiety and control-seeking.
- Selling during crashes? Panic.
- Chasing winners? Greed and FOMO.
- Ignoring fees? Laziness and inertia.
- Not investing? Fear of the unknown.
The antidote to all of it is having a plan and following it mechanically. Write down your investment strategy, automate as much as possible, check infrequently, and resist the urge to deviate when emotions run high.
The best investors aren’t the smartest. They’re the most disciplined.
Want to make sure your ETF portfolio isn’t falling into these traps? Run it through our free ETF Portfolio Analyzer to check for overlap, high fees, and concentration risk.