Experts warn of a possible recession in the US. These are the 3 biggest investment mistakes you can make

Kate Dore -

After almost a year of stock market volatility, high inflation and rising interest rates, a growing chorus of pundits is warning investors of a recession.

Goldman Sachs CEO David Solomon recently told investors there is a "very good chance" the US economy is headed for a recession, and JPMorgan Chase CEO Jamie Dimon expects a slowdown in six to nine months. months.

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While seasoned investors may remember the sting of past recessions, experts say there's a silver lining: the opportunity to learn from past mistakes.

These are some of the biggest investment mistakes, according to top advisers.

Mistake number 1: selling when the market falls

With the S&P 500 down almost 20% so far this year, it's easy to see why some investors panic selling when assets decline.

But many regret it once the market recovers.   

"The biggest mistake is thinking you're going to go low and buy low," opined Steven Check, president of Check Capital Management in Costa Mesa, Calif., which is ranked No. 41 on CNBC's 2022 FA 100 list. .

If you try to time the market when it falls, you are more likely to miss out on gains during the rally.

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“More or less, you want to stay the course,” he said, explaining how many investors have decades for retirement portfolios to recover.

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Whether you're a young investor or a retiree, Check suggests writing down a set of rules and sticking to them, no matter what happens in the stock market.

“Money is an emotional thing.

But you have to remember that the bag has done well over time,” she noted.

Mistake #2: Limiting Investing Amid Volatility

While some sell when the market falls, others avoid investing altogether.

About 65% of investors keep "more money than they should" outside the stock market because they are afraid of loss, according to a recent Allianz Life survey.

"We're more obsessed with what we might lose on paper than we are with opportunities that elude us and never take advantage of," said Josh Reidinger, managing director of Waverly Advisors in Birmingham, Alabama, which is ranked 59th on the FA 100 list. .

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There is a risk of missing out on future gains if you stay away from the stock market, as studies show that some of the best returns can follow the biggest stock market declines.

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The 10 best-performing days of the past 20 years came after the big stock market declines during the 2008 financial crisis or the 2020 pullback at the start of the coronavirus pandemic, according to a study by JP Morgan Asset Management.

“History does not repeat itself.

But it's a good indicator of where we're going,” Reidinger said.

Mistake number 3: not rebalancing the portfolio

Whether you invest during a recession or during a growth period, market changes often shift assets away from their target allocation.

Reidinger stresses the importance of rebalancing the portfolio based on pre-established parameters.

If you don't rebalance, your assets may no longer be in line with your goals or risk tolerance.