Get rid of the prejudices!
Equity culture has always been difficult in Germany. Common prejudices include that stock markets are unpredictable and are dangerous terrain for small investors in particular. Woe to those who are invested as soon as the big crash comes! Shares as part of retirement provision? For many investors, this idea is far too speculative. It’s best to only invest money that you don’t need at all! Those who take these points of view are susceptible to an unsuitable but widespread comparison: the stock markets are sometimes like in a casino.
Reason is a basic requirement for success
Admittedly, there are some market participants who actually approach their equity investments with a “casino mentality”. The lion’s share of your own assets is invested where you don’t have to get upset so much – time deposits, bonds, precious metals, real estate, life insurance – and you can try your luck with the money that is not absolutely necessary. You bet on certain individual stocks and you speculate on quick profits to stay in the casino language.
Only this approach is wrong. Stock markets don’t reward those who are looking for quick profits. The setback potential can be considerable if you rely heavily on individual stocks or even leveraged products for the stock market. It’s not easy to completely hide greed, because who wouldn’t want to invest all their capital in the next Amazon share? Only if you approach the issue of stocks sensibly, with a long-term investment plan, healthy diversification and patience in the difficult phases, for them is the stock market a long-term worthwhile affair. It is a recipe for success to participate sustainably in global economic growth and increasing corporate profitability – no speculation with an adrenaline rush like in the casino!
There are always difficult times
Now it is unfortunately the case that the stock market has not exactly promoted itself in recent months for more acceptance among German investors. A lightning-fast bear market, a V-shaped recovery with new setbacks – volatility rules, the feeling of uncertainty is widespread. The usual prejudices are booming: stock markets have disconnected from reality, the next crash is a matter of time, stocks have developed an irrational life of their own and depend on the drip of central banks. Anyone who invests now can go to the casino just as well! Experienced investors, on the other hand, have never been particularly concerned when the aversion to stocks has increased significantly. Markets often rise dynamically when the news situation is extremely cloudy.
Where will the stock markets go in the next few weeks? Could a second wave of COVID-19 infection cause the final collapse? There are no easy answers. Only this much is certain: stock markets will always make incalculable movements in the very short term. But they will be able to cope with the uncertainty, anticipate the future and, as always, navigate around doomsday scenarios. In March 2020, global equity markets recorded billions of dollars in cash outflows, and it will certainly be the case again in the next correction phase. Patience and courage are required, especially when the market is once again turbulent.
You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.
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