How to minimize risk in asset management - 5 mistakes you should avoid

The five biggest mistakes in asset management - how to prevent them with a systematic approach

People naturally tend to avoid risk. This is true in all areas of life and especially when it comes to investing. A lot of assets still remain in cash, current or savings accounts and do not yield any interest. Instead, more and more credit institutions and banks are charging penalty fees on high deposits and the high inflation rates are additionally increasing the loss of assets. There are certainly many ways to make mistakes when investing money. We have summarized the five biggest ones and a possible solution for you.

Mistake number 1: not investing in the stock market at all

Those who continue to rely purely on fixed-interest and risk-free investments in the current low-interest phase are losing money. Most products yield far below the average inflation rate. A long-term positive inflation-adjusted return of your investment can currently be achieved only by inviting in the stock market.

Mistake number 2: selling during crises

Think long-term. Even with short-term losses, stocks are superior to many other forms of investment in the long-term. Refrain from emotional decisions to sell when prices are falling. Even most professional market participants rarely find the right time to sell. Over a longer period of time prices will recover again.

Mistake number 3: not having an investment plan

Think in advance about the goals you want to achieve with your investments. Are you planning a slow but continuous growth of your investment with only minor fluctuations or are you prepared to take higher risks and achieve a better return? You should plan an investment horizon of at least 5 to 7 years for your equity investments.

Mistake number 4: not diversifying

Always spread your investment over a larger number of investment instruments. Not only in Switzerland, but also in most other countries investors tend to invest mainly in their own stock market. However, a worldwide diversification of investments makes sense and is absolutely necessary in the now highly globalized markets. The same applies to the distribution among different asset classes. Do not only rely on stocks, bonds or precious metals are also possible investments that can protect you against losses.

Mistake number 5: pursuing the wrong investment strategy

Following the wrong investment strategy is as bad as not following a strategy. If you are safety-oriented and get a bad feeling when you experience losses in the meantime, you should avoid riskier investments and focus on investments with low volatility and continuous appreciation.

Avoid investment mistakes with artificial intelligence

At Smart Wealth, we take a comprehensive approach when making investment decisions. Our self-learning algorithms have been helping investors make smart investment decisions for more than 20 years. Our products achieve excess returns of up to 17.40 % compared to the benchmark, and the maximum losses within an observation period of more than 18 years are up to 60 % lower. The so-called "sharpe ratio", which evaluates the relationship between the return and volatility of an investment, is between 1.00 and 1.39 for the AI-supported investments of Smart Wealth. Values above 0.50 can already be considered as very good.