Investor behaviour often has a greater impact on returns than stock selection itself, with emotional decision-making and poor diversification often causing underperformance.

Whether you’re a first-time investor or a seasoned market participant, avoiding these seven common mistakes could help protect your portfolio and improve your long-term returns in 2026.

1. Not diversifying, and not even realising it

Most investors know that they should diversify. Far fewer realise that they aren’t actually doing it (VanEck, 2026).

For example, owning BHP directly, an ASX 200 that holds BHP, and a resources fund that holds BHP gives you a triple bet on the same stock under the impression of having a diversified portfolio.

This is called overlapping exposure and it is very common in Australia because the ASX is very concentrated. As of March 2026, the top 10 stocks make up 49.2% of the ASX 200 and financials and materials account for 60% (Pinnacle Investment, 2024). This shows that adding more Australian products may stack the risk instead of spreading it.

True diversification means spreading risk across sectors, geographies, and asset classes in a way that actually reduces correlation instead of just adding more tickers to your portfolio.

2. Getting blindsided by Capital Gains Tax

The most expensive mistake which investors fall into is selling without considering the timing properly. Assets held for more than 12 months inside super receive a ⅓ CGT discount, whereas, the discount is 50% for individual investors. Selling just days before you hit the 12 month mark can cost you significantly more than you would expect, thus also meaning the money is not liquid for 12 months.

On the flipside, if you’re sitting on unrealised losses elsewhere in your portfolio, selling to crystallise those losses before the end of the financial year.

On an important note, the 2026 Federal Budget announced that from 1 July 2027, the 50% capital gains tax discount will cease to exist.. It is being replaced by a cost base indexation system with a minimum 30% tax rate on capital gains. If you’re building a portfolio today, this adjusts the numbers significantly (PWC, 2026).

3. Chasing last year’s best performers

Every year, one sector or asset class leads the market. Last year it was gold, recently it’s been AI. The best investment last year is rarely the best investment this year. Mining stocks, tech, property trusts all rotate, so buying on past performance is how you will buy high and sell low. Chasing last year’s best performing stocks or ETFs is a dangerous psychological trap known as “performance chasing” and it almost always results in buying at the absolute peak right before the market rotates (Ryan Ermey, 2026).

4. Doing it alone and missing the best opportunities

Self directed investing through a discount platform gives you market access, but not market advantage.

When quality companies raise capital through placements and institutional deals, they go to their broker relationships first,and this is often at prices below what’s available on the open market. By the time the trade is visible to a retail investor, the opportunity has already passed.

Working with a full service stockbroker means that your portfolio can participate in IPOs, placements and capital raises before they hit the wider market. For long term investors, getting better entry points on quality assets is one of the most durable ways to improve returns.

5. Not factoring in fees

Fees are easy to forget about because you don’t see them until the end. You don’t need the lowest possible fee as long as every dollar you pay is earning its keep.

The same logic applies to brokerage. A cheap trade that puts you into the wrong asset or misses a placement opportunity is more expensive than a slightly higher fee with the right firm.

6. Letting emotions drive decisions during volatility

Sometimes you win and sometimes you lose. That is part of the game. Maintaining your cool and sticking to your plan in times of uncertainty is important.

Every trade should be treated as a completely independent decision. This is one of the most difficult disciplines to maintain. After a loss, the instinct is often to ‘make back the loss’ whether that be taking a bigger position, acting faster or moving into something more

aggressive to recover ground. After a win, the initiative is often the opposite: double down on what you just worked on and assume the momentum continues.

The thing to remember is that the market has no memory of your last trade. The stock has no idea what you paid for it. This means that every position you take should be justified by what you know right now, not just by what happened last time.

The best investors don’t always get it right; they make each decision clearly and cleanly without the weight of the last one dragging on it.

7. Investing without a clear strategy

A documented investment strategy that defines your objectives, risk tolerance asset allocation helps you plan how to respond to market events. The best way to invest money in Australia, whether it’s inside or outside super, starts with a clear plan built around your specific goals. Everything else follows from that.

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Disclaimer

Vitti Capital Pty Ltd (ABN 13 670 030 145) is a Corporate Authorised Representative (001306367) of Point Capital Group Pty Ltd (ABN 41 625 931 900), the holder of Australian Financial Services Licence number 518031. This communication contains general information only and does not take into account your objectives, financial situation, or needs.

Before acting on any information, you should consider whether it is appropriate to your circumstances. We recommend you seek personal financial advice before making any investment decision.

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