7. They overtrade

“First of all, never play macho man with the market. Second, never overtrade”. – Paul Tudor Jones

Most investors prefer to do something rather than do nothing, even when that something often proves to be an unnecessary mistake, notably overtrading. Overtrading, or excessive buying and selling or churning of investments, is a mistake that can erode total returns.

It is essentially the mistake of being a ‘busy fool’ or being reactive rather than proactive. We can often believe we are being productive by continually reacting to changes in our investments when we are doing so unnecessarily.

Frequent trading often incurs additional transaction costs and increases the chances of making impulsive, ill-informed and costly decisions. Investors should adopt a disciplined approach and resist the urge to trade excessively.

It is essential to identify a well-defined strategy and stick to it, avoiding unnecessary transaction costs and potential losses. One of the main mistakes people make when trading or investing is focusing only on making very high returns in a short period.