How can real investment income be achieved in the long term without taking major risks – that is the daily bread of asset managers. What can normal savers learn from financial professionals when it comes to safe investments?
Safe and as profitable as possible, that is currently the main wish of most investors. What sounds very simple is a real challenge: because in times of constant new crises, high inflation and the need for bank bailouts again, it’s not that easy. Prices on the stock exchanges fluctuate wildly and traders look nervously at many problem areas – from Ukraine to Taiwan to the climate crisis and the sensitive energy markets.
At the same time, the return on popular investment products such as the savings book or classic life insurance is still far from sufficient to compensate for the loss of purchasing power, despite higher interest rates.
At the same time, the problems of US banks and the attempts to rescue a traditional institution like Crédit Suisse bring back memories of the financial crisis of 2008. So what to do with what you have saved so that it doesn’t become less and less valuable or end up being completely gone?
Switch money market accounts regularly
Not only ordinary savers face this problem, but also companies, foundations and wealthy families. They like to get help from independent asset managers for such questions and these financial experts recommend thinking soberly and not panicking.
“The situation always feels very bad for investors in the current situation,” says Michael Blanz, board member and partner at asset manager ALPS Family Office AG from Dietmannsried in Allgäu. “But if you look into the past or later in the rear-view mirror, you will see this time as a normal situation on the markets in a turbulent time.” However, it is important to understand the current factors, to be well informed and to take a long-term view set up properly. “By now, every saver should be aware that with 3 percent interest on fixed deposits and 6 percent inflation, they are not doing good business here,” warns expert Michael Blanz. In addition, it is certainly not a bad idea to spread larger sums of money across different banks. In principle, deposits of up to EUR 100,000 per customer at domestic institutions are legally protected, sometimes even more through additional systems.
Especially in times of rising interest rates, loyalty is rarely rewarded anyway, and in the overnight money area, regular switching can actually mean significantly more income at the moment. But despite the constantly improving offers, provider hopping is not a good long-term complete solution.
Spreading widely is still recommended
“The higher interest rates for call money accounts are attractive for the quickly available nest egg,” says Julie Bossdorf, asset manager at Habbel, Pohlig & Partner from Wiesbaden. If you want to position money with a longer investment horizon of 3 to 5 years or even decades for retirement provision, you should think about other asset classes. “With a mixture of stocks, bonds and precious metals, returns are more likely to be possible in the long term, with which the purchasing power of assets can be maintained through real positive returns,” says Juli Bossdorf. You don’t need millions of assets for this, because small amounts from around 50 euros per month can easily be invested widely via fund savings plans.
But what about security here? As a rule, the securities in an active fund or ETF are so-called special assets. This means that they continue to belong to the investor even if the provider or the custodian bank goes bankrupt. However, this is not the case with all financial products. That’s why you should understand something like this before you buy it or rather spend a few euros for independent advice. Risks are part of the overall picture of almost all investments, such as price fluctuations in the case of shares or the default of debtors in the case of bonds. However, the wealth management professionals never put all their eggs in one basket. They distribute assets across different forms of investment, companies, regions and currency areas. Of course things can go wrong in one area. But the goal is to preserve values in the long term. It is very unlikely that things will go badly everywhere at the same time for many years. With manageable risks, opportunities can be used to preserve assets in real terms.
So now just cancel all savings accounts and life insurance and invest everything in the stock market and create a pot of gold? It doesn’t have to be at all. But adding some of it, depending on your own taste, to your own personal long-term investment mix could be worthwhile and ultimately bring more real security.
Invest 250,000 euros in a crisis-proof manner
Here is an example of the most commonly recommended asset allocation
- 45% equities international
- 40% bonds international with short to medium maturity
- 10% physical gold
- 5% cash as a tactical quota
Source: asset manager ALPS Family Office AG
Author: Florian Junker