5 Stocks and Shares ISA mistakes to avoid

I believe putting money in a Stocks and Shares ISA to invest in great businesses over the long term can potentially help to build wealth. That is why I do it.

Along the way, though, here are a handful of common ISA mistakes I aim to avoid.

1. Spending too much on fees and commissions

The first is an obvious one but still potentially a costly error.

Fees and commissions can eat into the value of a Stocks and Shares ISA – over the long term, perhaps badly.

So I take time on an ongoing basis to check whether I am using the Stocks and Shares ISA that best suits my own needs.

2. Trading not investing

I mentioned the long term above.

That is because I do not aim to trade by buying and selling shares frequently (likely racking up commissions each time).

Rather, I aim to buy what I think are great companies I would like to hold for a while.

3. Not spreading my investments enough

Why did Warren Buffett sell a lot of his Apple (NASDAQ: AAPL) stake recently?

Whatever the reason, one benefit is improved diversification.

It is easy to fall in love with an investment idea. It can also happen that a great idea leads to a soaring share price, so the role of one share in a portfolio balloons over time – exactly what happened with Buffett’s Apple stake.

Either way, not staying diversified can be a costly mistake. With an annual Stocks and Shares ISA allowance of £20k, I think it is simple to keep diversified.

4. Buying the business case, not the share

At its current price, I think Apple also illustrates another potentially costly investing mistake.

Is Apple a great business? I think it is. The market for the sorts of products and services it sells is huge and I think it could grow over time.

Within that market, Apple has a unique position that can help it make massive profits, as it has done consistently in recent years. From its brand to patents and customer base to distribution network, Apple has a strong “moat“, as Buffett calls a company’s competitive advantage.

But, is Apple a great share for me to buy today? I do not think so.

In a nutshell, I think its price-to-earnings ratio of 39 means it is overvalued.

As an investor, like Buffett, I am not only seeking to buy into great businesses. I also want to buy such shares at attractive prices.

5. Not reviewing developments along the way

But if doing too much can be a mistake, so can doing too little.

Again, I think Buffett’s move on Apple is instructive here. He is not a trader, having held some of the shares he owns for decades.

But equally, he does not have his head in the sand. A great investment idea can become less attractive because of changes in the company’s outlook, its share valuation, or both.

So, although I do not keep tinkering with my Stocks and Shares ISA, that does not mean that I buy shares then ignore them for decades.