Risk assessment and portfolio diversification: CEO of Armenian company Cube Invest about myths and real features of investing
YEREVAN, March 10. /ARKA/. To form a successful investment portfolio, two main steps should be highlighted, said Mikael Margaryan, CEO and Chairman of the Board of Directors of the investment company Cube Invest.
"The first is a correct assessment of risk appetite, i.e., understanding the client's investment horizon. The second is the importance of portfolio diversification. In the current situation, uncertainty is high, and any factor—a statement by the country's leader or breaking news—can have a sharp impact. So, portfolio diversification plays an important role," he said in an interview with the ARKA agency.
Speaking about the established stereotypes around investing, especially in Armenia, Margaryan addressed five main myths.
"First, I will highlight the stereotype 'Investing is for the rich.' I think this is a myth. Today, there are innovative technologies, such as fractional shares, which allow investors to buy a part of a security rather than an entire lot. I do not agree with the statement that only the rich can invest—today, anyone can, even with a minimal amount," he said.
The second myth, according to Margaryan, is "Investments are akin to gambling."
"I also disagree with this. There is serious fundamental analysis involved in understanding the impact of certain circumstances over time. While it’s impossible to predict everything, fundamental analysis allows us to make certain forecasts. Gambling works based on a completely different principle, and I do not see a parallel for comparison," he noted.
The third stereotype, as explained by the Cube Invest CEO, concerns the need for deep market knowledge, which falls somewhere between myth and reality.
"There are two types of investors—active and passive. Active investors are those who like to follow the market themselves, read the news, and make decisions based on this information. In this case, yes, knowledge is required. But today, professional market participants can provide advisory services to those who do not have the time or opportunity to track market trends," he said.
Margaryan combined the myths about "investing in one company" and "investing is risky" into one point, emphasizing that, of course, one should not invest in a single company, especially considering the large number of uncertainties.
"At the same time, investments are risky, no one argues. But these risks can be contained and balanced through diversification and fundamental analysis. One of the most incorrect approaches is to invest in a company based solely on hearsay that it is worthwhile. Without proper information about the company driving growth for specific reasons, you won’t know when it’s time to sell its shares if the company starts to decline. Therefore, to make the right decisions, you need the necessary information and analysis," he emphasized.
