Hang Seng is an acronym for it, meaning the benchmark stock market index in Hong Kong. This is a means by which the daily movements of the biggest listed stocks in the Hong Kong Stock Exchange are recorded and monitored. Hang Seng is a good example of an international stock market index that helps global investors diversify their portfolios. Nonetheless, some blunders have to be avoided while investing into hang seng. The top 5 mistakes and how to avoid them.
- Not Doing Proper Research
The biggest mistake that an investor can do about investing and doing proper analysis of Hang Seng. Understanding what makes up Hang Seng in various time frames will help you to appreciate its performances. An analysis of important economic and political forces that influence on the Hong Kong’s and China’s markets. There is therefore a need to focus individually on specific companies constituting Hang Seng and consider their future prospects. Poorly researched decisions often leave the investors with irrational and ill-thought decisions.
- Timing the Market Incorrectly
Short-lived market timing, which involves following short-term trends in stock investing, proves fatal. As with any equity market, however, Hang Seng also has its volatility meaning that short-term fluctuations are not an indicator of a market’s long-term potential. Investors should be looking at this investment on a much longer basis, avoiding trying to get in or out of the market as a result of a daily fluctuation in price. Market timing is not superior to dollar cost averaging. Buy an asset by investing a fixed amount in it regularly rather than at one go as this helps to average out the purchase price over the ups and downs.
- Taking Excessive Risk
Return potential aside, risk management matters equally when buying into an unstable stock market such as Hang Seng. Some investors, however, end up taking on a lot of risks than they are able to bear just for the sake of yielding more profits. One must evaluate one’s risk tolerance and invest wisely within this limit. Spreading out across sectors, styles, and even individual stocks is an effective way of lowering portfolio risk. You should avoid leveraged products such as futures and option unless you are skilled at managing risks.
- Lack of Exit Strategy
It is worth noting that many investors do not specify a means of exiting the stock investments within HSI. They usually do not set specific sell rules and price targets that enable them to let go of losing positions before it is too late. A good exit strategy ensures that money is made when prices are high and saved during low periods. For example, it can rely on technical indicators, value measurements, or change in your investment logic. Use set trailing stop-losses that automatically exit out if the price moves against you.
- Letting Emotions Override Logic
Most seasoned investors, however, get emotional when it comes to stock markets. The emotions of fear and greed are responsible for some of the most illogical actions taken in life. Once prices begin to fall sharply, fear of loss could lead to selling at the very worst moment imaginable. However, once momentum kicks in, they become greedy by chasing momentum and end up paying more for stocks. Investing success depends on objectivity and staying true to fundamentals. Do not allow yourselves to be guided by day-to-day price movements.
5paisa Investors should conduct thorough research, take long-term view, manage risks appropriately, define exit strategy, and stay cool. To optimize reward and minimize risk, stay away from making these types of errors.