Want to Be a Successful Investor? Avoid This 1 Mistake.

The basics of investing are fairly simple: Buy low, sell high. It can become tricky when you're not sure what's low or high, and an important part of learning how to invest is becoming familiar with valuation techniques.

But despite the very elementary directive to buy at the low and some glaringly high valuations, many investors still get caught up in the hype of exciting stocks and expect them to keep going higher. More experienced investors know that massive run-ups and astronomical valuations are unsustainable, and people who buy after a stock jumps can be left holding the bag.

If you want to be a successful investor, the mistake to avoid is investing in overvalued stocks.

Greedy and fearful

Often, the best time to buy is after a stock plunges. That's counterintuitive, but savvy investors know that the disconnect between a stock price and a company's fundamentals offers the greatest opportunities when the price is low and the fundamentals are strong. Many investors miss those opportunities out of fear; they see a falling price and worry about whether it will get back up.

Warren Buffett is probably the best-known value investor. Value investing involves finding stocks trading below their intrinsic value, with the expectation that their prices will rise. One of his most famous quotes is, "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." Others become fearful when stocks plummet, but smart investors know that's exactly the time to buy.

One recent example is when Berkshire Hathaway bought UnitedHealth Group (NYSE: UNH) stock last year. The stock had plummeted after management cut its profit outlook. UnitedHealth is the largest medical insurer in the country, and Buffett and his team understood that was a rare buying opportunity. Berkshire Hathaway bought the stake in the 2025 second quarter and sold it in the 2026 first quarter, when Abel closed out several small positions. It had gained 24% from it's drop in May 2025 to the middle of January 2026, around the time Abel might have sold it.

Top stocks can keep growing

Investors shouldn't conflate a high price tag with an overvalued stock, though. Some stocks can continue delivering for investors even when they've already minted millionaires. Berkshire Hathaway, for another good example, didn't buy Amazon stock until 2019 or Alphabet stock until last year.

In fact, you'll sometimes get the best deals after the hype dies down and the stock has proven itself; that's when it becomes a value.

When you see other investors chase the latest trend, resist the urge to invest in overvalued stocks. Keep to top stocks that are reasonably priced, and you'll be prepared for whatever the market brings.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.