Investors lack knowledge about the importance of asset allocation. Investors do not educate themselves as to the importance of asset allocation, and what asset classes tend to perform better than others over the long-run. I need not go into the importance of overcoming this mistake as I have written extensively about this possible mistake. Just click on the asset allocation category (both original blog and new site) and one will begin to find material to solve what I think is mistake #4.
A corollary to this mistake or a correction of the mistake is to use index funds or ETFs to populate the portfolio rather than build a portfolio strictly from stocks. There is nothing wrong with using a few stocks. However, I have yet to meet a small investor who is an ace at stock selection over the entire global market. Diversify all over the world using ETFs as suggested here at ITA Wealth Management. But when doing so, be aware to use the SHY cutoff or Momentum Model.
Even if one is using the Momentum Model, diversification is essential and using ETFs helps with this diversification.