Want to make good investments? Avoid these 3 common mistakes, Morningstar portfolio manager says
Making good investments is key for those looking to accumulate wealth, but it’s not always easy —especially given the ongoing macroeconomic uncertainty and fears of a looming recession . From following fads with blind faith to trying to forecast market moves, Nicolo Bragazza, an associate portfolio manager at Morningstar Investment Management, names three investing mistakes to avoid. 1. Trying to predict the market Many investors spend a lot of time trying to pre-empt how the market will perform for the rest of the year by forecasting inflation levels, interest rate movements and potential responses by central banks, Bragazza said. Instead, they should be “focusing on robust portfolio construction.” Given the ongoing macroeconomic uncertainties, he suggests that investors focus on creating a diversified portfolio that can “withstand market forces.” This involves exploring the exposures and sensitivities of different sectors and asset classes to create a defensive, well-balanced portfolio, he told CNBC Pro on Aug. 14. 2. Not paying attention to valuations Paying attention to valuations is absolutely key, Bragazza said, as it stops investors buying into trendy sectors that could be overvalued. Big Tech stocks like Nvidia have become firm investor favorites over the last year thanks in large part to the hype surrounding artificial intelligence. However, the portfolio manager is steering clear. He highlighted that the sector has been among the worst performers globally on a quarter-to-date basis after stocks took a hit during the recent tech sell-off . Over the last month, the Magnificent Seven Index — which captures Alphabet , Amazon , Apple , Meta Platforms , Microsoft , Nvidia and Tesla — is broadly flat. The broader S & P 500 index, meanwhile, is around 1.8% higher. “Tech is not one of the most cyclical sectors, or at least it’s not one of your traditional cyclical sectors such as real estate, financials or energy, and so the recent sell-off indicates that they are very sensitive to change in market sentiments,” Bragazza said. “So it’s better to avoid sectors — or stocks — like these which are overvalued.” 3. Placing too much emphasis on politics This year has been election-heavy , with countries ranging from Taiwan and India to the U.K and U.S. all heading to the polls. Investors often follow the elections and try to anticipate how the results could affect sectors, and in turn, specific companies. But this is a mistake, according to Bragazza. “Investors tend to think of elections as a market-moving event,” he noted, saying instead that they’re just events that create “short-term volatility.” He suggests investors focus instead on fundamentals, such as the structure of an economy, key sectors that have been performing well over time and stocks that have recorded strong gains. “Following this pays off over the long-term,” Bragazzo added.
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1190222745-b65de6b6c3b948d2a22db5d28c5b1fb8.jpg "Is My Credit Score Good Enough for a Mortgage?")
:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1390654298-5468501d88fb4e7faca533096301f91c-10635296cf604385879a8a0cdb404622.jpg "Best Strategies for Your Roth 401(k)")
:max_bytes(150000):strip_icc():format(jpeg)/socialsecurity-whentoapply-794e7d2e1615450a9c7530288e2f5dad.jpg "Unlocking Benefits: The Best Time to Apply for Social Security")