In the first of a series of guides to personal financial planning, Katie Mundell  lists five pitfalls that investors often fall into when they start out.

1. Chasing the perfect deal

Buy low, sell high — it sounds like common sense and obvious advice. The problem is that too many investors obsess about timing, desperately trying to buy when the market is at its very bottom and sell on the day the market reaches its peak.

All investors get decisions right and wrong: the important thing is not to get carried away by your successes and to learn from your mistakes

No-one gets this exactly right – even the most experienced investors get it wrong more often than you’d think.

It’s important to remember that you are investing for the long term: what matters is buying an investment when it’s under-valued and selling it when it is fairly valued. Far too many investors spend far too much time fretting about getting every last penny out of an investment and, as a consequence, miss other opportunities.

If an investment has reached a price where you think selling is the right decision, go ahead and sell. The price is as likely to fall as it is to reach that mythical high point you’re frightened of missing.

2. Getting obsessed

Of course your investments are important. Of course they require your time and attention. But that doesn’t mean you need to check their prices six or eight times a day.

Investments rise and fall – and they sometimes rise and fall dramatically within a single day. In our experience, constantly checking prices and values leads to a short-term focus and unnecessary worry about the performance of your investments.

Don’t obsess about short-term fluctuations: it’s the long-term performance that really matters.

3. Falling asleep

Some investors go too far the other way and neglect their investments. You need to strike a balance. It will be different for each investor – but every portfolio needs to be reviewed regularly.

First of all, portfolios become unbalanced over time as some investments within them perform well and others perform poorly. If it’s your aim to have, say, 25 per cent of your portfolio invested in UK manufacturing, then you need to check your figures from time to time. Portfolios can become unbalanced quite quickly, and you may need to do some buying and selling to keep to the your original strategy.

Similarly, if you made an investment because of a particularly successful fund manager then you need to check occasionally to make sure that he or she is still managing your fund. Fund managers are only human – they change jobs like the rest of us – and even the most successful fund manager may go through periods of poor performance.

4. Putting your eggs in one basket

Every good investment portfolio is diversified. You should only invest in areas that you understand – but that doesn’t mean you should only invest in one sector. If that sector does badly, then all your investments will be affected.

Ideally, your investments should be diversified geographically, by sector and by risk profile. They shouldn’t all be in one country, they shouldn’t all be in one sector of the economy and – depending on your appetite for risk – your portfolio should contain a mixture of aggressive and defensive investments.

5. Losing perspective

One day, you’re going to get an investment decision spectacularly right. The shares you bought at 20p each will soar in value to be worth several pounds. Sadly this doesn’t make you Warren Buffet.

Equally, when you get a decision badly wrong, it doesn’t mean that you should never make another investment as long as you live.

All investors get decisions right and wrong: the important thing is not to get carried away by your successes and to learn from your mistakes. Just as your investments are there for the long term, so learning about investments takes a long time – experience cannot be acquired quickly. Sadly, the lessons can be expensive.

Financial conditions around the world make the climate for investment difficult at the moment – but there are still profits to be made if you do your research, look for good value and adopt a long-term approach. It always makes sense to consult with an independent financial adviser before making any investment decisions.