7 Investing Mistakes That Could Cost You in 2026 — And How To Avoid Them

December 13, 2025

Jordan Rosenfeld

5 min read

Market swings, artificial intelligence (AI) hype cycles and shifting tax rules could all trip up investors in 2026. Financial experts say the biggest risks, however, are the small mistakes investors make under pressure.

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2026 is shaping up to be another year of unpredictable markets for investors. Inflation uncertainty, geopolitical tensions, AI-driven hype and tariff instability create potentially volatile conditions. Investors veer between fear of missing out and fear of losing everything.

“A market that produces FOMO and has bouts of volatility can create the worst conditions, where investors are buying high and selling low,” said Wendy Li, Chief Investment Officer and Co-Founder of Ivy Invest. “The most damaging behavior is making impulsive changes without a clear framework.”

Adem Selita, cofounder of The Debt Relief Company, suggested staying the course if you have no good reason to change.

“If you stick to your long-term strategy you will be all the wiser for it,” he said.

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Just because an investment has fallen in price doesn’t mean it’s a deal, Li pointed out, especially in speculative assets like cryptocurrencies or anything with “continued hype” like AI-related stocks.

Robert R. Johnson, CFA and a professor of finance in the Heider College of Business at Creighton University, said that even using the term “investing” is sketchy when it comes to crypto. “One cannot invest in Bitcoin or other cryptocurrencies because you cannot use the fundamental financial tools to value crypto … Investing in cryptocurrencies is pure, unadulterated speculation.”

The Magnificent 7 and AI-linked stocks now dominate the S&P 500 more than ever, meaning everyday investors may be far more concentrated than they realize, Li said.

“The problem isn’t that public equities or the Mag 7 are bad investments; it’s that heavy concentration means the portfolio has essentially one risk driver,” she said.

Paul Walker, a financial consultant and the author of “A Money Book Anyone Can Read” agreed, noting that “Apple, Microsoft, Alphabet, Meta, Amazon, Nvidia and Tesla now make up about 35% of the S&P 500.” This means that “investors should be prepared for the possibility that the AI boom cools off.”

Selita agreed that while over concentration in any sector is often not good, “there appears to be outsized risks associated with artificial intelligence right now.”

One of the biggest mistakes investors make is changing strategy based on headlines, fear or hype. A disciplined investment plan should be designed to withstand market cycles, not get rewritten because conditions change.

“Too many trades and overthinking of their long-term strategy … can really be detrimental in the long term,” said Selita.

Johnson’s tried and true recommendation is that all investors create an Investment Policy Statement (IPS).

“Investing without a plan is like driving without a roadmap or GPS,” he said. The whole point of an IPS is to guide you through changing market conditions.

Most investors miscalculate their risk tolerance, either by taking on too much exposure when markets are strong or scaling back too much when conditions feel uncertain. Heading into 2026, it’s very important you understand how your portfolio would behave in a downturn.

“An investor might ask herself, if equities dropped 30% in 2026, how would she feel?” asked Li. She said it’s appropriate to take “compensated risks that you can live with through various market environments.” However, Selita pointed out that’s easier said than done.

“It’s not easy to gauge whether you’ve taken on too much risk or too little,” he said. “This will really depend on what stage you are in life.”

Tax mistakes can quietly cost investors hundreds or thousands of dollars. Many of these issues are harder to correct if they’re discovered at the end of the year instead of proactively.

Mitchell Nelson, CPA at File Tax Online, pointed out that mutual funds can send you a tax bill even when you hold onto them and never sell, in an instance of the “wash sale rule.” He said many people don’t know they’ve broken this rule until they file their taxes.

It’s also important to understand “the two types of dividends,” Nelson said. “How long you hold a stock matters a lot.” Qualified dividends are taxed like long-term capital gains, while ordinary dividends get taxed at less-preferable, regular income rates.

A diversified portfolio and consistent rebalancing help protect investors from concentration risk, emotional trading and performance chasing. As Li noted, investors should “establish asset allocation targets” and “know what you own,” while Walker emphasized rebalancing “once a year.” Selita emphasized that sticking to a dollar-cost-averaging plan can keep long-term goals on track.

With a clear plan, steady habits and a willingness to ignore the noise, you can avoid the most expensive mistakes of 2026 and keep your investments working in your favor.

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