According to the 2025 Natixis Global Survey of Individual Investors, 23% of respondents had given up already and didn’t know what to do. The survey also found that 47% of investors had a moderate risk tolerance, yet they still expected average long-term returns of 10.7% to exceed inflation. While tariffs and other economic factors have impacted the stock market in 2025, there are still investing mistakes that you want to avoid when deciding on how to invest your money to ensure that you’re protected as much as possible.
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We will review the common mistakes Americans make when buying individual stocks and provide advice on how to avoid them.
Most Common Investing Mistakes
Not Properly Diversifying
“One common oversight when investing in individual stocks is underestimating the potential importance of diversification,” said Jared Hubbard, fintech product manager at Plynk. “Diversification means that you spread your money across a variety of different investments, which can help as you seek to reduce your risk.”
By owning different investments, you lower the impact that any single investment can have on the overall value of your portfolio. When Americans focus on purchasing individual stocks, they miss out on diversification and they could also allocate too much of their portfolio towards one specific company. Hubbard also warned that another mistake with diversification and individual stocks is buying them all at once. Due to price fluctuations of stocks, you could end up buying at a higher price if you decide to use all of your funds to purchase that stock at a specific point.
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Buying Dividend Stocks Solely for the Purpose of Creating an Income Stream
While Evan Drury, financial advisor with U.S. Financial Services, agreed that the mistake was not properly diversifying, he shared that, in his opinion, the biggest mistake was buying dividend stocks for the purpose of creating an income stream. Drury noted that this was popular in generations past, as the thought was to buy strong companies and live off the dividends of one or a few stocks in retirement. “Sadly, what investors might not realize is that dividends can be cut or removed entirely. Companies may go through bankruptcy and you will lose your investment along with the income stream, as we saw in 2008,” he added.
While the idea of dividend investing to create a stream of income seems popular on social media, it’s not always the wisest strategy when looking for individual stocks to invest in. Drury believes that people aren’t considering the whole picture when it comes to investing and returns. He said dividends are part of the total return, which takes into account capital gains, dividends and interest. If an investor focuses solely on dividends, they may miss out on potential appreciation in stock prices. No one knows when a stock will tumble and if it will ever recover.
How Can You Avoid Making These Common Mistakes?
Consider Dollar-Cost Averaging (DCA)
Hubbard suggested considering dollar-cost averaging (DCA), a strategy in which you invest a set amount of money in the same stock or fund systematically over a specified period. “Rather than investing a large amount all at once, you break it down into smaller amounts to invest on a scheduled basis,” he added.
This can help you invest at various prices, rather than trying to choose the perfect time to purchase a specific stock, which can be a stressful endeavor. Investing smaller set amounts over time may smooth out your average purchase price because you buy when prices are both higher and lower. By using DCA, you remove the emotion from investing in individual stocks, as you make purchases at scheduled times without having to decide on the timing. During periods of market volatility, this approach can be helpful in limiting your risk.
Set Up Automatic Investments
A straightforward way to implement DCA is to set up and regularly monitor automatic investments. Whenever you buy a stock or fund on some platforms, you have the option of making a one-time purchase or scheduling monthly recurring investments. By scheduling recurring investments, you can invest at various price points.
Diversify Your Investments
The experts agreed that it’s challenging to pick the right stock for you or even the right couple of individual stocks to invest in. If you’re concerned about selecting the right stock to invest in, you’ll want to consider diversifying your portfolio. Drury views diversified investments as allocating your money to many stocks or having small positions in all of the S&P 500. He’s a proponent of investing in index funds based on the overall markets you want to be in.
“While concentration can grow your account faster, the same is true on the way down,” Drury said. He believes that there is very little reason for most people to buy individual stocks, unless they’re comfortable taking a risk on a small portion of their portfolio.
Create a Financial Plan Tailored for Your Situation
The experts agreed that you want to work with a trusted financial professional to create a plan that makes sense based on your personal goals and risk profile. This may involve purchasing individual stocks or selecting an index to invest in. Either way, you want to determine if investing in individual stocks is the right strategy for you.
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This article originally appeared on GOBankingRates.com: I’m a Financial Expert: This is the No. 1 Mistake Americans Make When Buying Individual Stocks
