There are four main investment mistakes we’ve seen that can lead to exceptionally poor investing results.

If you are unhappy with your investing results, you should check to see if you are making one or more of these four main investment mistakes:

1. Buying and selling too often
2. Buying too many low-quality investments
3. Failing to diversify
4. Buying too many stocks in the broker/media limelight.

Investment mistakes: Buying and selling too often

Some of your investments may be headed for a huge rise in the long term. If you always sell at the first hint of trouble, you can wind up selling your best stocks at a temporary low, just before a big rise.

Deciding when to sell is the trickiest part of investing. We are programmed to run from danger, and every day the media brings new reasons to sell. But if you sell too often or too quickly, you’ll sell a lot of your best choices way too early, and you’ll never make any serious profits.

You can find numerous rules of thumb that aim to tell you when to sell. Most are based on chart-reading or technical analysis. All work at times, but none work consistently. When they fail, the profits you miss out on are likely to overwhelm any risk they help you avoid.

Investment mistakes: Buying too many low-quality investments

If you delve into low-quality stuff like penny stocks or stock options, it takes more than low commissions to turn the inevitable losses into profits. Getting out at the first hint of trouble can limit your losses, but that’s not the same as making money.

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When you buy penny stocks you could have a big payday if you make the right choice. But the odds against success are high. Penny stocks are almost always involved in riskier ventures, such as finding mineral deposits that can be mined at a profit, commercializing unproven technologies or launching new software.

Buying low-quality Canadian penny stocks is one of those things that can appear to be successful before it goes badly wrong. Some get hooked on it, since low-quality stocks can be highly profitable over short periods. That’s because they are generally more volatile than high-quality stocks.

Investment mistakes: Failing to diversify

Manufacturing and Resource stocks involve extra risk, Canadian Finance and Utilities involve lower risk, and the Consumer sector falls somewhere in between. Sectors go in and out of investor favour, depending on economic conditions, corporate earnings, and investor whim. But in the long run, winners and losers will appear in all five.

If you stick to one or two sectors when you buy stocks, you may get lucky and all of your picks will be successful ones. But all your stocks could wind up out of favour and depressed. If you have to sell, you’ll do so at a low price. So, spread your money out to eliminate luck. That way, you’ll always have exposure to the year’s most profitable investments, a key to successful investing.

Investment mistakes: Buying too many stocks in the broker/media limelight

You need to be aware that self-interest plays a role when brokers and the media decide what stocks to focus on. The media tend to focus on stocks (and investment-related issues) that intrigue the reader, and that can have an impact on readers’ finances.

Brokers tend to focus on stocks that can bring them business opportunities. That means brokers zero in on actively traded stocks, which can generate trading and commission income. They pay extra attention to stocks that may offer fee opportunities, such as stock and bond underwritings, merger advice or whatever.

Mind you, brokers and the media are always looking for something new. So, stocks go in and out of the broker/media limelight all the time. As a result, most popular stocks go through occasional stints in the limelight. But when a stock spends a lot of time in the limelight, it can make investor expectations rise to excessive levels. This tends to support or even inflate a stock’s price, as more and more investors buy.

Investing in the wrong stocks is a common investment mistake? Have you ever made that mistake and then got out of it without too much damage? How?

Some investing mistakes are worse than others. Have you made any that almost wiped out your portfolio?