Investor mistakes in 2025 and how to avoid them in 2026

2025 was a year that rewarded investors, but not always for the right reasons. Markets delivered solid headline returns, a handful of stocks produced extraordinary gains, and volatility often resolved itself just quickly enough to feel manageable. For many portfolios, it was tempting to conclude that process didn’t matter as much as it once did.

That conclusion would be a mistake.

Beneath the surface, 2025 exposed a series of quiet but costly errors for investors: holding on too long when information changed, confusing momentum with conviction, and assuming diversification where it no longer existed. 

In some cases, investors hesitated when they should have acted. In others, they acted decisively - just too late. And in many portfolios, the absence of true diversifiers only became obvious when markets finally wobbled.

Looking ahead to 2026, the focus shifts away from calling the next turn. 

This isn’t about predicting markets, but about reflecting on the decisions that mattered last year and building guardrails that improve outcomes when conditions change.

Below, I unpack three of the most instructive investment mistakes of 2025 and what they mean for investors heading into the year ahead.

The cost of not acting when information changes

CSL (ASX: CSL) is one of the clearest illustrations of how 2025 punished delayed decision-making, not just panic. The stock didn’t collapse in a single moment; it broke in stages, offering investors multiple opportunities to reassess risk.

The first inflection point came in August 2025, when CSL released its FY25 results. On the surface, the numbers looked respectable: revenue rose 5% to US$15.6bn, NPAT increased 17% to US$3.0bn, and dividends were lifted.

But the market focused on what lay beneath: softer-than-expected guidance, the announcement of almost 3,000 job cuts (around 15% of the workforce), and plans to demerge the Seqirus vaccine business.

The reaction was swift. CSL shares fell ~16% in a single session, one of the largest one-day declines in the company’s history.

Ahead of the result, the stock had been trading around $271, making this the first clear decision point for investors: reassess the growth profile, resize exposure, or accept a lower-return outlook.

Many investors chose to wait.

The second and far more damaging break came at the 28 October 2025 AGM, when management cut guidance again, slashing expected FY26 revenue growth to ~2–3% and NPATA growth to ~4–7%, well below prior expectations and well below what the market had historically paid for. 

The market response was brutal. CSL shares fell another ~16% in a day, pushing the stock down to $170 by late October. 

From pre-August levels, the share price declined roughly 35–40%, and CSL will be ending 2025 with poor total returns, alongside other Livewire reader favourites Wisetech Global (ASX: WTC) (-44.33%) and Telix Pharmaceuticals (ASX: TLX) (-41.09%) (*as at Thursday 11 December). 

The key lesson from CSL is not that investors should have sold immediately; views on valuation and long-term quality legitimately diverged. 

It’s that many investors failed to act deliberately at the first break, only to exit later at materially worse prices. Volatility exposed not only fear but also decision paralysis.

What this means for 2026:
When a stock reprices sharply, investors must actively choose: resize, re-underwrite, or exit. Doing nothing is still a decision, and in CSL’s case, it proved an expensive one.

Speculation thrived where fundamentals were ignored

DroneShield (ASX: DRO) perfectly captured the dual nature of speculative success in 2025. It was one of the best-performing stocks on the ASX, delivering extraordinary gains as defence spending and geopolitical risk moved firmly into the spotlight. 

But timing mattered enormously. For investors who entered too late - or failed to exit when conditions changed - it was also one of the most painful examples of how momentum cuts both ways.

DroneShield’s rise was not without substance. In the first half of FY25, the company reported NPAT of $1.2 million, its first profitable result, marking a sharp turnaround from a $4.8 million loss a year earlier. 

Contract wins accelerated, operating scale improved, and the business crossed an important psychological threshold for growth investors. Unsurprisingly, the share price surged almost 400% during the year, dramatically reshaping valuation metrics in the process.

At its peak, DroneShield's share price was ~$6.60 in 2025, and its trailing P/E ratio blew out as earnings were still nascent, with it reaching mid-300x levels on a trailing basis - levels that demand near-flawless execution. 

Some brokers remained supportive, arguing the valuation reflected a newly profitable business with a long runway. 

Others were far more cautious. Luke Laretive of Seneca, for example, questioned whether an Australian defence manufacturer could sustainably justify such multiples in a winner-takes-all global industry, arguing that investors should “take the money and run”.

What made DroneShield emblematic of 2025 was not that it rose - many great stocks did - but how investors responded as conditions changed. 

As valuation expanded, insider selling increased, short interest rose, and price momentum rolled over. Yet retail buying intensified, with many investors interpreting each decline as another entry point into what had already been one of the strongest runs in recent ASX history.

This highlights a crucial distinction: nobody makes money at the entry point alone. Returns are realised at the exit. 

Identifying potential “ten-baggers” is only half the task; knowing when the risk-reward has shifted is just as important. 

In DroneShield’s case, the combination of stretched valuation, changing positioning signals, and slowing momentum demanded more discipline than many investors applied.

What this means for 2026:
Speculative winners can still be great businesses, but great businesses can become poor investments at the wrong price. When valuation, positioning, and price action diverge from the narrative, the hardest decision is often letting go. In 2025, DroneShield showed that failing to make that decision can turn a spectacular winner into a costly lesson.

True diversifiers were ignored... Until they worked

One of the quieter mistakes investors made in 2025 was simply not allocating to gold at all. Often dismissed because it doesn’t generate income, gold nonetheless delivered exactly what many portfolios lacked when volatility rose: resilience.

Over the past 20 financial years, gold has produced an annualised return of roughly 10.7% in USD terms, outperforming every major asset class, including equities. Returns were even stronger for unhedged Australian investors — a result that surprised not just investors, but the Livewire editorial team itself, with more than three-quarters of readers expecting US equities to top the table instead.

Gold’s appeal is not just its long-term performance, but the way it behaves across different market conditions. A July 2025 State Street paper found that gold tends to perform best during equity drawdowns, while delivering steadier performance across market cycles than most traditional assets. That low correlation has shown up repeatedly across crises, inflation scares, and short bursts of market stress.

Structural forces reinforced the case in 2025. Central banks continued to accumulate gold, ETF access made ownership easier, and concerns around fiscal sustainability intensified. Notably, foreign central banks now hold more gold than US Treasuries for the first time since the mid-1990s, underscoring a shift in how reserves are being managed.

Over the past two decades, gold has risen from the low hundreds to above US$4,000 an ounce in 2025, outperforming every major asset class — without paying a cent of income along the way. That lack of yield has long been the objection. In 2025, many investors learned that yield is only one dimension of return.

What this means for 2026:
The lesson isn’t to chase gold’s past performance. 

It’s to recognise that excluding it altogether was a portfolio construction error. 

Gold earns its place by changing outcomes when confidence in markets, policy, or currencies wobbles, and it’s most effective when it’s owned before it’s needed.