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DIY investing: the pitfalls investors must watch out for

All major stock markets, including those of the UAE, Europe, Asia-Pacific and the U.S. were significantly shaken by the outbreak of the pandemic that swept the globe.
However, since then, stock markets around the world, including GCC equity markets, have reported an impressive rebound.
It is this astounding comeback of equities that has caught the attention of numerous novice investors across the UAE and beyond, who are attempting to make the most of the current buying opportunities without consulting a professional adviser.
Naturally, investors should seek out investment opportunities when they come about, but it should also be noted that DIY investing comes with significant pitfalls.
It's almost universally regarded that to minimise the potentially catastrophic impact on your finances in the most effective way is to work with a financial adviser.
A professional can help you to make optimal investment decisions in five principal ways.
First, a pro will help you to ensure your investment portfolio is adequately diversified. This is crucial in order to mitigate risk. That said, this process must be carried out correctly. Portfolio diversification can only add significant value if the new asset has a different risk profile.
History has taught us that a long-term, multi-asset approach to investing - with a combination of global equities and bonds - offers attractive returns relative to risk.
Second, it's important to have a plan. Without a sound plan, you are gambling rather than investing. Those with an investment plan can expect their portfolio to outperform those without a plan.
Third, emotions shouldn't come into investing. Keeping a cool head is key when making financial decisions. Of course, most decisions made in life carry a degree of emotion, but when it comes to investments, too much emotion could be devastating, as they are afflicted with prejudices and biases.
Fourth, investors should regularly review their portfolio. Investment must be reviewed and perhaps rebalanced once a year at the very least, ideally more often, to ensure they are still on the right track to achieving the established long-term financial objectives.
And fifth, not placing too much focus on historical returns is also crucial. Returns made in the past have little bearing on the present environment. Indeed, the investment situation in the future will likely be worlds apart from time-aged averages.
Since the height of the coronavirus pandemic, stock markets have become ever more attractive to a burgeoning number of novice investors.
However, while investing in equities is still almost universally recognised as one of the prime ways to generate wealth, the drawbacks of getting it wrong could be massively risky for you and your loved ones if you don't seek professional advice.
- Nigel Green is the CEO and founder of deVere Group. Views expressed are his own and do not reflect the newspaper's policy.