The biggest investment mistakes beginners ALWAYS make on the stock market

INVESTING takes a lot of guts – it can be a rollercoaster ride seeing your money soar and fall.

The trick is to hold your nerve – but how do you do that while avoiding rookie mistakes? We spoke to top investment experts to find out how you could make a mint and beat the market – including the “haystack hack” everyone should know about.

Investing is the best way to grow your cash – but there are risks to consider, and checks to do before you get started.

Experts advise having savings to cover three to six months of essential living costs.

Once that has been put away, you can start investing with as little as £1, or set up a monthly direct debit from £25.

The return you make will depend on how much you invest and where you invest it, but be aware that you could lose all of your money if your investment tanks.

Only invest money you can afford to sacrifice. Once you’re ready to go, follow these four golden rules.

Mistake one: you’re too scared to start

Are you new to investing and feel nervous getting started? Don’t let a lack of confidence stop you, says Georgie Yarwood, a senior investment strategist at trading platform Vanguard.

There’s never a “good time” to start – but drip feeding small amounts of cash you can afford into your investment account is a really sensible strategy.

Leaving your cash lying around in a current account means you’re losing out on easy money.

If you had invested £20 in a FTSE 100 tracker fund – which tracks the 100 top companies in the UK – five years ago, you would now have £33. 

However, if you had held the money in cash, you would have only £16 thanks to inflation.

“You see people waiting for the right time to invest, and I think the answer is there’s never going to be a right time to invest. You don’t have a crystal ball,” she says.

Mistake two: you don’t have a goal

The most successful investors, according to Andy Reed, Vanguard’s head of behavioural economics, are those who know EXACTLY why they are investing.

Is it a holiday fund, a house deposit, or even for your children? Once you’ve set your target, you can plan which investments you’re going to shop for.

Andy said long-term investing is usually considered to be at least a 10-year time frame. Short term is zero to three years and medium is around three to ten years.

If you are saving for the short term – for example, if you are planning on buying a house soon – you want to take on less risk so you don’t lose money from your pot as you reach your goal.

You might want to focus on investing in bonds, Andy said. These are a type of loan made to governments, and are considered to be less risky than putting your cash in the stock market.

If you invested £25 into bonds every month for three years, you’d end up with £1,657, having invested a total of £1,500.

For medium term goals, it’s all about balancing risk.

For a five-year investment goal, putting 50 per cent of your money in shares and 50 per cent in less risky bonds is about right, although it all comes down to your risk appetite.

If you have a longer-term goal – for example, you’re investing for your retirement – then you have time to weather a few ups and downs, so experts say you should consider taking on more risk to try and get a better return.

A good strategy could be to put your cash into equities. These are shares that can be more unpredictable and riskier to invest in – but the payoff is that you could see your money soar.

For example, if you had invested £25 each month into a fund that follows the FTSE100 over the past 10 years, you would now have £5,162, a return of £2,162 after investing £3,000.

Mistake three: Picking an expensive platform

It’s really important to pick the right investment platform – which is where you put your money in to invest.

There are websites and apps – like Vanguard, Interactive Investor and AJ Bell – which allow you to choose and manage your investments, all in one place.

However, they come with fees. You will likely be charged in order to hold your cash on the platform, make a trade, and to buy or sell an investment.

The most cost-efficient investment platform for setting up your stocks & shares Isa is Trading 212. You can open with a minimum investment of £1 and it’s free to buy and sell shares and funds.

There is a 0.15 per cent charge if you trade non-UK investments.

This means that if you contribute £25 a month over 10 years your total investment will be £3,000 and you will £4,875 have including your returns with no fees to pay (as long as you only invest in UK shares and funds).

Giving you a total return of £1,875.

This is based on an average annual return of 9.64 per cent, the average for a stocks and shares Isa over the past decade according to Unbiased.

In contrast, interactive Investor charges a flat fee of £5.99 a month up to £100,000 worth of investments.

So if you were to invest the same amount you would lose roughly £719 to charges, reducing your total return to £1,156.

So make sure you are comparing prices between platforms so you are not paying too much for the services you need. 

Mistake four: You lose your head

Don’t lose your head even when the markets are looking rocky – instead, follow the “buy and hold” method.

If the value of your investment drops, which means it is worth less, it’s easy to panic, sell up, and cut your losses.

This means you’ve “crystallised” a loss – which means you’ve locked your loss in instead of giving your investment a chance to rebound and sell for a better return.

Remember – if you are investing medium or long term market dips are normal. So sticking with your investment for the long-term can help your money recover.

Data shows that sticking with your investments through tough times –results in a better outcome overall than if you had sold your investments.

If you invested £10 each month in to the FTSE100 tracker fund for 10 years, but then sold your investments at the height of the Trump tariff market chaos last year, you would be £490 worse off than you would be if you had stayed invested.

But, it takes discipline to stick to investing through that volatility as the changes and uncertainty can play on your emotions. 

My stocks and shares ISA increased in value by £50k

NEERAJ Kumar opened a stocks and shares ISA in 2002 as a way to invest in the UK stock market.

The grandfather-of-two, 64, who lives in Bristol, wanted to save money for retirement and to help him become mortgage-free more quickly.

He started with £1,000, which has now grown to a staggering £200,000 23 years later.

Neeraj, who works in IT, said: “I am a fan of ISAs and investing in the market for longer-term investments. 

“They usually outperform cash deposits, and you do not need to worry about declaring any money you make on your tax return.”

His ISA is with Halifax, and he hand-picks the stocks and shares he wants to invest in. 

The account charges £9.50 per online trade to buy and sell funds and UK stocks.

There is also a £36 annual customer admin fee. 

Neeraj pays into the account when he can, but does not have a set direct debit.

He estimates that around £150,000 of his £200,000 pot is money he has paid in, which works out at around £6,500 a year or £541 a month.

This means he has earned £50,000.

“I feel secure and confident to have my savings,” he said. “I have even set up ISAs for my wife Sangeeta, my two adult children and two grandchildren.

“I want to put that same savings habit into all my family.”

And the golden investment rules to follow instead

Now you know which mistakes to avoid… so how do make a mint investing?

Everyone wants to find the one stock that will make them a fortune and the holy grail is an investment called a “ten bagger stock” – where the value of your investment goes up by tenfold.

Sam North, market analyst at eToro, says the key to finding one is to do your homework.

Read investment news boards and forums to see what stocks other people are talking about. Make sure to read company results and updates in business sections, and keep tabs on the wider news. 

“Look for explosive revenue, where topline growth is 50 per cent or more annually and a company that possesses a competitive edge, known as a ‘moat’, which gives it an advantage,” he says.

However, finding a ten-bagger is not easy. For beginner investors, a better approach might be to follow the haystack method, Andy says.

“There’s this great quote: ‘don’t look for the needle by the haystack’,” he says.

“So rather than investing in a specific stock, you can invest in the whole market, which takes the pressure off.”

Examples of this include the FTSE 100 or FTSE 250 or America’s S&P 500.

While you may not get the shocking returns with a ten bagger, your cash will still work hard – and it takes the pressure off.

For example, if you had put £25 a month for a decade in to a tracker fund following the FTSE250 you would have £4,115 – £1,115 in returns.

Or choose other funds – bundles of shares pre-chosen by experts – that will give you a spread of investments so you aren’t betting on one or two choices.

Finally, invest in something you know a lot about… all of that expertise you have can help you pick a winning investment in that sector.

For example, if you’re a builder and know that your clients are really interested in net zero, you can look at up-and-coming companies focusing on this sector and consider investing.