For those looking to build wealth, investing well is key, but it’s not always easy – especially given ongoing macroeconomic uncertainty and concerns about a looming recession. From blindly following fads to trying to predict market trends, Nicolo Bragazza, associate portfolio manager at Morningstar Investment Management, lists three investing mistakes to avoid. 1. Trying to predict the market Bragaza said many investors spend a lot of time trying to predict how the market will perform during the rest of the year by predicting inflation levels, interest rate changes and potential central bank responses. Instead, they should “focus on solid portfolio construction.” Given the ongoing macroeconomic uncertainty, he advised investors to focus on creating a diversified portfolio that can “withstand market forces.” This involves exploring risk exposures and sensitivities across different industries and asset classes to create defensive, balanced portfolios, he told CNBC Pro on Aug. 14. 2. Don’t focus on valuations, Bragaza said, focus on valuations Absolutely key as it deters investors from buying into a potentially overvalued fashion industry. Big tech stocks like Nvidia have become investor favorites over the last year, thanks in large part to the hype surrounding artificial intelligence. However, the portfolio managers’ direction is clear. He highlighted that the industry has been one of the world’s worst performers so far this quarter after stocks took a beating during the recent tech selloff. The seven major indexes covering Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla have been essentially flat over the past month. Meanwhile, the broader S&P 500 gained about 1.8%. “Tech 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 shows that they are very sensitive to changes in market sentiment,” Bragaza said. “Therefore, it is best to avoid overvalued industries or stocks like these.” 3. Overemphasis on politics This year is a big year for elections, with elections coming up in countries from Taiwan and India to the United Kingdom and the United States. Investors often focus on elections and try to predict how the results will impact industries and, therefore, specific companies. But Bragaza said that was a mistake. “Investors tend to view elections as a market-moving event,” he noted, but said they were only events that caused “short-term volatility.” He suggested investors instead focus on fundamentals, such as the structure of the economy, key industries that have performed well over time and stocks that have posted strong gains. “It will pay off in the long run,” Bragazo added.
