Master in Decision Making & Innovation
It is time to announce that the assessment process of Financial unit has already finished and you have a feedback available in the Community. We would like to share with you some final comments about your performance during this activity.
The main goal of Finance unit activity was that you were able to put in the investor’s shoes investing in a real stock market. In order to get that goal, you were proposed to face a new challenge and participate in ROBOTvsGAIA 5, where you represented the GAIA Community in a competition against the Robot through the Stock Exchange Simulator.
What we should have learned:
1. That the profile conditions are based on how I have to distribute my investment among the different asset classes. A conservative investor should have the greatest weight in public debt and fixed income; and that an aggressive investor should have the greatest weight in equities.
2. That the asset allocation and the geographic distribution is the most important part for the creation of a portfolio. It implies much more than the Stock Picking. How much you destine to RF or RV and in which countries you invest is what will determine your profitability in the long term.
3. Investing in Indexes is much more reliable than investing in stocks directly. The Robot has invested in indexes and had an implicit commission playing against him Vs. the Gaians. Even so, he has won the Gaians in most of cases. The reason is that the Robot only invests in indexes, and the probability of making mistakes is much less than trading or direct Stock Picking.
4. Diversification is the key. Put the eggs in the same basket is not a good strategy if we want to obtain some benefits. It was important to have a diversified portfolio according to our investor profile in order develop this activity in a more profitable way.
Main mistakes made for some of the participants:
1. Some of you did not create a profile in the right competition (ROBOTvsGAIA5) or started too late; obviously, much of the evaluation depended on registering on time and start operating from the beginning doing the three required movements per week. All students who have signed up late or have not done so, had very difficult to overcome the activity.
2. Not to identify the risk profile: Those of you who had operated but had not identified their investment profile, could not be evaluated in two sections: neither by volatility nor in comparison to the Robot. Identifying the risk profile should always be the first step you take before you think about investing.
3. Try to invest in an arbitrary way: Some of you decided to buy or sell in an arbitrary way without doing some research about the companies. In order to do that research, you just needed to use the Stock Exchange platform or just surf the Internet.
4. Invest more than what was due to the profile: some students have had a very high volatility for the profile they have. Even some, who have achieved very positive results, have risked much more than their profile advised them to risk. Even having won, it is a mistake, because if the portfolio has been able to earn 10% in less than 1 month being moderate, for example (120% per year) means that it has risked a lot of equity capital. If it had gone wrong, 10% would have been lost, and a moderate is never willing to risk so much.
5. To have tried to invest in shares directly without having a correct analysis, except for those investors with the capacity to carry out a technical or fundamental analysis of a company, you should not invest in shares directly. You should invest in ETF’s or Funds that replicate indexes. Selecting a specific company is a decision that must be made based on a previous study of the course and the situation of that company.
If you want to know more details about your personalized investing performance, please take a look at the feedback and the document attached to the Community!