Avoiding Investment Horror Stories

Avoiding Investment Horror Stories

As we emerge from the spooky season, Morningstar asked several financiers for their investment horror stories, and what advice they have for avoiding the worst.

Dan Kemp, global chief investment officer, Morningstar Investment Management Europe: Don’t be so quick to sell your entire portfolio when assets are falling. Clients who did this in Kemp’s previous career of managing individuals’ portfolios often saved money at the bottom of the market cycle, but then failed to reinvest and drifted further away from their goals. If market movements are making you uncomfortable, best to just look away.

Susan Dziubinski, director of content, Morningstar.com: Dziubinski was once caught up in the charisma of Mark Mobius and his emerging markets pitch, only to lose money on the Templeton Developing Markets fund. The lesson she learned was not to chase performance, take the long view, and don’t allow a charismatic manager to speak louder than solid investment planning. Dziubinksi wasn’t the only interviewee that listed Mobius as their horror story; Morningstar’s director of personal finance Christine Benz also lost money on the fund.

Sylvester Flood, senior editorial director, Morningstar: Investing some of his mad money into BioNTech in late 2020, Flood then saw it skyrocket, but then failed to sell before they dropped to $260 from a high of $447. His advice is to always establish a price you’re comfortable selling at when you buy a stock, be prepared for a company to hit its long-term valuation quicker than you anticipated, and don’t let tax minimization worries cloud your judgement if that stock has exceeded your target.

Christopher Greiner, data journalist, Morningstar: Fear of a further decline after the market recovery last year made Greiner wait on the sidelines while the market rose up and up and up…until he realized that the bull had defeated the bear this time around. While timing the market is very difficult, dollar-cost averaging can serve you well since it reduces the impulse to make decisions in order to prevent potential mistakes. He quoted Peter Lynch: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

Dave Sekera, CFA, chief U.S. markets strategist, Morningstar: After losing money on his first investment right out of college, Sekera learned to do the legwork and the due diligence. His advice: decide at what valuation you want to buy a stock, and then learn when to cut your losses or build a bigger position if the market shifts against you.