6 common investing mistakes & how to avoid them

Investing has become easier than ever, with many options available at the click of a button. But that doesn't mean investing effectively is a no-brainer.

It's important to learn about potential investment mistakes and the tried-and-true strategies you can use instead to get ahead in your investing journey and reach your financial goals.

We're surrounded by investing advice—from fads on social media to family members and friends swearing by get-rich-quick schemes. With all the noise, you need to know how to filter out the flawed approaches. Here are investing strategies to avoid and smart steps to take instead.

Part of learning how to invest wisely is realizing that a single move or a big break isn't what will help you reach your long-term goals. Instead, you should explore a variety of opportunities: stocks, bonds, mutual funds, real estate, commodities and more. Each differs in risk level, and those with high potential rewards often also have high potential losses.

Diversifying your assets—spreading your money over different asset classes and mixing companies, sectors, regions, timeframes and terms—can help minimize your risk. That way even if some investments flop in a volatile market, you're unlikely to lose everything.

How you diversify depends on several factors that are personal to you. By taking into account when you hope to reach your goal (your time horizon) and how much risk you're comfortable with, you can come up with a portfolio mix that may give you a better chance at investment success.

Investors dream of buying a stock at a low price right before the company takes off and the stock's value skyrockets. It's called timing the market. In reality, anyone who has timed it perfectly was probably just lucky. Statistically speaking, timing the market is impossible, even for the most seasoned investors, because so many variables influence how much a stock grows in value.

Instead, consistently investing in a diversified portfolio that fits your risk tolerance allows your investments to weather any market volatility and grow over time. A strategy known as dollar-cost averaging— where you invest a fixed dollar amount in stocks or mutual funds regularly — has been shown to help investors weather market volatility while consistently investing over time. Because you're sometimes buying high and sometimes buying low, you'll average out what you pay for each share. This model can keep you from focusing too much on short-term losses and stay focused on accumulating long-term gains.

When the market is booming and you're getting 20% or higher growth in your portfolios, you might feel like you're on top of the world. However, when a recession hits and the market drops by 25%, the opposite can be true. If you're too narrowly focused on short-term wins and losses, you may make choices based on the emotion of the moment rather than on historical trends in the market.

For long-term growth, it's vital to develop a broad portfolio and ride out downturns in the market rather than give in to the impulse to buy and sell based only on how the day's performance made you feel.

The same measured decisions also are useful when you're deciding what to invest in. You may be tempted to buy stock just because you like one aspect of the company—such as investing in Disney because you like the Magic Kingdom. But disregarding impartial data like historical performance isn't a sound strategy, and an objective financial advisor can help you choose investments that fit your values without compromising your growth potential. Having the bulk of your investments governed by a more diversified, less emotionally driven approach is more likely to help you achieve your goals without regrets.

Most people have long-term financial goals like retiring with enough to live on and medium-term goals like paying for a house or a college education. Plus, everyone needs accounts for short-term needs, like emergency savings. It's a mistake to invest without considering the time horizon of your goals—that is, how long it will be before you need the money.

For short-term goals, you usually need to have cash easily available. A money market, high-yield savings account, or CD can work well. You'll earn some interest with little risk of loss, and you can take money out anytime.

If you're shy about the market's volatility, you may think savings accounts are good place for your retirement money, too. But while that may keep it safe and accessible, you're sacrificing long-term growth potential when your time horizon may be decades long.

When it comes to market investments and your longer-term goals, consider that the S&P 500 has averaged annualized returns around 7% (adjusted for inflation) for the past 200 years. This shows that the economy tends to grow over time despite short-term ups and downs. If you have time on your side, diversified investments that include stocks and funds within your IRA or employer-sponsored retirement plan like a 401(k) can be a wise choice for accumulating long-term growth.

It's exciting to see big year-over-year returns when your portfolio grows, but those numbers are misleading if they don't factor in the impact of taxes and fees. Some platforms charge more than others just to have your investments with them, and it's important to factor the fee structure into your decision of where to invest. A financial advisor can help you dig into the expense ratios on your particular investments. If you opt for active management, the fees can be worth it for the additional professional management and ongoing monitoring. The goal is to match the best combination of stellar service with reasonable and transparent fee structures.

It's a similar concern with taxes. Employer-sponsored 401(k) retirement accounts and Roth and traditional IRAs are popular—and solid—choices because of the tax benefits they offer. Compared to these retirement accounts, taxable investments have an effectively lower rate of return, all else being equal, because some of the taxes you pay along the way may offset any realized growth. Employing tax-advantaged options first may give you a higher potential for overall growth.

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Understanding the complexities of investing and sidestepping common financial mistakes can be a challenge, yet many people choose to go it alone. In truth, though, seeking expert advice is a strength, not a weakness. Financial advisors have a wealth of information to share that can help you formulate the best investing strategy for your needs.