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Even seasoned investors can make basic ISA mistakes, and I had my share in 2024. Here are three that stand out the most.
Mistake 1: treating investing like gambling
After carefully constructing a balanced portfolio of FTSE 100 again FTSE 250 stocks, I decided to have a little fun with the money I had left.
So I invested in a couple of volatile stocks: Automaker James Bond Aston Martin Lagonda and grocery specialists The Ocado Group.
They both hit perfectly, crashing at around 96% and 86% maximum. I thought they must be deals. They weren’t there.
Aston Martin’s share price is down 49.32% over 12 months, while Ocado is down 57.77%. Investing is fun but not a game. And it’s definitely not a punt. These two flops dragged down my performance in an otherwise successful year. I won’t be so rash in 2025.
Mistake 2: making a big call
I had 2024 all the maps in my head. This was the year when interest rates would fall and the high yielding stocks of the FTSE 100 would rise as a result.
As yields on cash and bonds fall, high yields fall Legal and General Group again Phoenix Group Holdings share price look even more attractive.
However, as inflation appears to be strong, price cuts have been scarce. We may have to wait until 2025. My mental map was rubbish.
As Warren Buffett warns, no investor can repeatedly and accurately predict the future. Legal & General’s share price is down 8% in one year and Phoenix is down 3%.
As mistakes go, this isn’t too bad. The two insurers yield a bumper 9% and about 11%, respectively, and I will reinvest the entire dividend to buy more shares at a lower price. And who knows, maybe interest rates will fall faster than expected in 2025, and stocks will rise. That is not a prediction.
Mistake 3: thinking about past performance
Even rookie investors know that past performance is no guide to the future. A warning appears in every investment ad. Alas…
Two years ago, I came up with a name Intermediate Capital Group (LSE: ICG) is my best choice for 2023, but I don’t have the money to buy it myself. Last Christmas, I discovered that a private equity specialist had lived up to my expectations: its shares had risen more than 50%.
I kicked myself, but still didn’t buy it. I thought I missed my chance. However, the share price of Intermediate Capital Group increased by another 28% this year. A subsequent yield of 3.73% would have increased my total return by more than 30%.
I think it’s a great company but I missed it because I was stuck with all the work I lost.
This looks like the opposite of Mistake 1, but it’s actually the same. Rather than looking at the company’s fundamentals, I’ve been looking at the stock price. In football they call it watching the ball.
Intermediate Capital Group looks well-placed to deliver organic growth as private equity markets expand, and raise record amounts of funds. First-half pre-tax profits rose 21% to £196m, with a surprise 55% increase in efficiency. And it looks like it’s trading at a solid 13 times earnings. I should be looking at stats like this, not performance. I will try to fix all this in 2025.
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