One of the Worst Investing Mistakes You Could Make in 2025

The stock market can often feel overwhelming, particularly during times of market volatility. Yet, periods of market growth can bring their own stresses, as it’s unpredictable when the next market decline might occur.

As the S&P 500 (^GSPC) has increased by approximately 24% over the last year, a survey from December 2024 by the American Association of Individual Investors reveals that over a third of investors are feeling negative about the market's outlook for the next six months. If you're feeling anxious about the market's future, it's important to know you're not alone.

However, one of the biggest mistakes you can make as an investor is allowing emotions to dictate your decisions, especially as we look towards 2025. Here’s why that’s the case.

Check Your Emotions at the Door

Despite the stock market’s considerable gains over the past year, uncertainty lurks ahead for many investors.

Historically, the average bull market for the S&P 500 has lasted around three years, a study from Bespoke Investment Group shows. With the current bull market now nearing its third year, many investors may find themselves anxious about a potential downturn. Additionally, political changes and general uncertainty as we approach 2025 can add to this apprehension.

However, making quick decisions based solely on these fears could lead to significant financial losses. The future of the market is unpredictable, and there's a chance that it could continue on an upward trajectory. If you withdraw your investments now in fear of a crash, you may miss substantial gains if that downturn doesn't materialize.

For example, if you had ceased investments back in March 2020 due to concerns about the COVID-19 pandemic, you might have avoided the stock market thinking it would enter a prolonged slump. But the reality was different; after a brief crash, the market unexpectedly surged, with the S&P 500 soaring by over 27% by the end of 2020.

Choosing to remain invested during that turbulent time would have been challenging, but keeping a level head and continuing to invest while the market was down could have led to significant rewards later on.

A Strategy for Calming Stock Market Nerves

While it’s easier said than done to avoid letting emotions take over during investing, especially when substantial funds are involved, there are strategies to mitigate market anxiety. One of the most effective strategies is to invest in quality long-term stocks.

Focus on stocks from strong companies that have sound fundamentals—like maintaining an industry edge and having capable leadership that can steer the company through tough times.

Even though quality stocks can still be volatile in the short-term, particularly during unstable market conditions, they tend to weather downturns more effectively and often deliver favorable returns over the long run. When your portfolio is comprised of healthy companies, you can invest with more confidence, knowing your investments will likely endure market challenges.

A Reliable Investment Option

If you’re uncertain about where to begin or prefer a safer investment choice, consider an S&P 500 ETF, such as the Vanguard S&P 500 ETF (VOO) or the SPDR S&P 500 ETF Trust (SPY).

These types of investments include shares from 500 of the largest U.S. corporations, many of which are established industry leaders. Although no stock market investment comes with guarantees, those within the S&P 500 are among the most likely to thrive during turbulent market periods.

Regardless of where you choose to invest, it is crucial to verify that the companies in your portfolio possess strong fundamentals. Get ready to remain invested for the long haul, enduring any market fluctuations. By taking these proactive steps now, you’ll be positioned to handle whatever challenges arise in 2025 and beyond.

Investing, Stock market, S&P 500