What are some investment mistakes

Backgrounds for investment mistakes

Existing customer portfolios often grow over a longer period of time without control of risk and performance. In addition, many customer portfolios show fundamental investment errors when they are first put together. As a result, the structure of many securities accounts is extremely unfavorable. This applies not only to custody accounts that were put together by private investors alone, but also to those that were created on the basis of recommendations by an investment advisor.


Empirical studies on behalf of banks and insurance companies repeatedly reveal the same fundamental investment error in private customer portfolios: One-sided investments lead to excessive risk accumulation in the overall portfolio. However, based on the latest research, it is psychologically explainable how these investment errors come about.


A well-known phenomenon is that a private investor prefers to invest in securities or funds in his home country and possibly in those of neighboring countries. However, preference is given not only to certain regions, but also to certain industries. Studies show that almost 40 percent of German private investors invest exclusively in securities from German companies, especially those in the financial, chemical, pharmaceutical and telecommunications sectors. Investors often prefer the industries in which they work.


The problems with this home- and industry-oriented investment behavior are that these industries and regions are influenced in the same way when certain market events occur.


In addition, private investors limit themselves to just a few individual values ​​when putting together their share and fund portfolios. Investors, who are obviously influenced by rating lists and reports from the media or who rely on private tips, often practice stockpicking without a strategy.


These examples highlight just a few of the potential investment mistakes that retail investors can make.