Common Mistakes Made by DIY Investors – 🤔🧐 1. Misunderstanding Taxes on Investments – Different investments have varying tax implications, such as capital gains tax (CGT), tax-free savings (TFS), and roll-up funds. Ignoring tax effects can lead to inaccurate return projections. 2. Using Too Many Administrators – Consolidating investments under one administrator can lower administration fees. Choosing the right administrator with robust systems and a wide range of investment options is crucial. 3. Not Understanding Administrator Roles – Administrators manage investments but do not provide financial advice. Investments in discretionary accounts remain in the investor’s name, while life-linked products belong to the holding fund, which may pose risks if the fund fails. 4. Herding Effect – Many investors follow trends, leading to over-diversification and dilution of returns. A concentrated portfolio or passive investing may be more effective. 5. Tax Implications of Foreign Assets – Offshore investments may attract CGT, estate duty, and situs taxes. Feeder funds are taxed differently than direct offshore holdings, leading to additional CGT on currency depreciation. 6. Sequence of Returns Risk – During accumulation, volatility benefits investors through rand cost averaging. However, in retirement, stability is key to avoid a negative spiral when drawing income. 7. Confusing Volatility with Risk – Volatility is normal and necessary for investment growth. Risk is the potential for permanent loss, often caused by poor investor behavior rather than market movements. 8. Failure to Distinguish Between Volatility and Loss – Investors often mistake temporary declines as losses. Understanding the expected drawdowns of a portfolio helps manage expectations. 9. Incorrect Benchmarking – Investors often use cash or inflation as benchmarks, which may be misleading. Comparing investments to appropriate indices (e.g., ALSI40, S&P 500, MSCI World) ensures a fair performance assessment. 10. Competing with the Joneses – Chasing “hot tips” or past market trends can be misleading. Success stories are often highlighted, while losses are ignored. A disciplined, well-researched investment approach is key.