In this context, the American network “CNBC” quoted the co-portfolio manager at Morningstar Investment Management, Nicolo Bragaza, as saying that there are three investment mistakes that should be avoided.
First – Trying to predict the market
Many investors spend too much time trying to predict how the market will perform for the rest of the year by forecasting inflation levels, interest rate movements and potential responses from central banks, Bragaza said. Instead, they should “focus on building a strong portfolio.”
Given the ongoing uncertainty about the macroeconomy, he suggests that investors focus on creating a diversified portfolio that can “withstand market forces.”
He said that this includes exploring the risks and sensitivities of different sectors and asset classes to create a defensive and balanced portfolio, according to the report that Sky News Arabia Economy reviewed.
Second: Not caring about evaluations
Paying attention to valuations is crucial, Bragaza said, because they prevent investors from buying into trendy sectors that may be overvalued.
Big tech stocks like Nvidia have become a favorite among investors over the past year, largely due to the hype surrounding artificial intelligence. However, the portfolio manager is avoiding the technology.
He stressed that the sector was among the worst performers globally on a quarterly basis so far after stocks were hit during the recent technology sell-off.
“Technology is not one of the most cyclical sectors, or at least not one of the traditional cyclical sectors like real estate, financials or energy, so the recent sell-off suggests that it is very sensitive to changes in market sentiment,” he said. “So it is best to avoid sectors – or stocks – like this that are overvalued.”
Third: Focus heavily on politics.
This year has been full of elections, with elections in countries ranging from Taiwan and India to the United Kingdom and the United States.
Investors often follow elections and try to predict how the results will impact sectors and, in turn, specific companies. But that’s a mistake, according to Bragaza.
“Investors tend to think of elections as a market-moving event,” he noted, adding instead that they are simply events that create “short-term volatility.”
He suggests investors focus instead on fundamentals, such as the structure of the economy, key sectors that have performed well over time, and stocks that have posted strong gains. “Taking this approach will pay off in the long run,” Bragazzo added.
Common mistakes in the stock market
For her part, financial markets expert Hanan Ramses explained that many investors, especially beginners, fall into a set of common mistakes while investing in stock markets, which may cost them significant losses.
Ramsis said that one of the most prominent of these mistakes is “falling in love with the stock you are investing in,” where the investor becomes so attached to a particular stock that he ignores negative information related to it, believing that its performance will improve despite all indications to the contrary. She added that this excessive attachment can lead to significant losses.
She pointed out that “following rumors” is another common mistake, as some investors are influenced by rumours circulating in the market without any scientific basis or reliable information, which leads them to make ill-considered decisions that negatively affect their investments.
Another mistake Ramses mentioned was “not selling profitable stocks,” where investors hold onto their stocks even after they make profits, thinking that holding them for a longer period will increase their profits. She explained that this behavior could be devastating if the value of the stocks declines significantly after that.
The financial markets expert explained that “quick investments and trends” can be risky, stressing that trading in narrow price ranges can increase costs and reduce profits.
Finally, she warned against “investing in too few types of stocks,” noting that this approach could put investors in a difficult position when they need liquidity, forcing them to sell their stocks at a loss. She stressed that some resort to borrowing to increase their investments, which increases the risk of exposure to losses if market conditions change.
Ramsis concluded her speech by saying that investment is always full of risks, and capital tends to be cautious. Despite the many mistakes made by investors, some learn from their experiences and develop over time.
Different challenges
In this regard, Bilal Shaib, Director of the Vision Center for Studies, confirmed that investors face many challenges that may lead to making fundamental mistakes when making their investment decisions, noting that the most prominent of these mistakes are related to the lack of proper planning and experience.
He said that one of the most important mistakes made by investors is related to “the lack of an economic feasibility study for the project,” as this study is the basis for identifying the time frame for implementing the project, determining the required investment costs, in addition to marketing strategies and funding sources. He added that the absence of a feasibility study puts the project in a weak position from the beginning.
He pointed out that “choosing the stage of the project” is a decisive factor in the success of the investment, explaining that entering an industry that is going through a decline, such as the sulfur industry or Nokia phones, may lead to the failure of the project. While the maturity stage in any industry is the most suitable for investment due to its low risks compared to the growth stage, which is characterized by higher levels of risk.
He stressed that the “experience of the project owner” plays a pivotal role in the success of the investment, as experience helps in determining the location of the project and choosing partners and shareholders, in addition to securing appropriate sources of funding and marketing the product effectively. He stressed that lack of experience is one of the most prominent mistakes that investors can face.
Regarding “financing,” Shoaib stressed that many projects rely heavily on internal resources without having a clear vision of how to invest the financing or manage borrowing. He pointed out that this mistake can greatly affect the project’s ability to be completed, especially in societies with emerging economies that are characterized by rapid economic changes, such as exchange rate fluctuations. Therefore, Shoaib stressed the importance of setting a specific timetable and a clear economic vision for financiers, whether they are from equity or banks.
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