The year 2019 was not an easy one for investors: there was no noteworthy interest on savings books or secure, multi-year investments such as time deposits. Experts estimate how 2020 could develop and whether precious metals such as gold will generate high yields.
“We are in an absolute low-interest phase,” says Annabel Oelmann from the Bremen Consumer Center. Not a completely new phenomenon: the key interest rate in the euro area has been at a record low of zero percent for three and a half years, since September banks have now been paying 0.5 percent penalty interest on money that they park with the European Central Bank (ECB). The ECB does not plan to raise the base rate before mid-2020, it said in summer 2019.
Investing at low risk does not match low interest rates
The low-interest phase is good for property buyers: loans are currently cheap. Investors, on the other hand, are left behind. “We Germans tend to invest low-risk. That is what is going to doom us,” says Oelmann. Because: “Anyone who still saves in the conventional way, literally burns the hard-saved assets with a view to inflation,” explains Maik Bolsmann, Managing Director of B&K Vermögen in Cologne.
This is borne out by exemplary figures: the inflation rate was 1 percent in November 2019. On the other hand, fixed deposits, according to FMH Finanzberatung, only achieved an average return of 0.1 percent, savings books to only 0.02 percent.
The year on the stock exchange was different: “It has developed surprisingly well for investors, especially compared to the fourth quarter of 2018,” explains Jens Hartmann, Managing Director of ficon börsebius Invest in Düsseldorf. A look at the Dax shows that. The leading German index rose by a good 25 percent by the end of November 2019 – compared to the previous year. Nevertheless, patience is important on the stock exchange: “Fluctuations as we saw them in the fourth quarter of 2018 are simply part of it,” explains Hartmann.
Trade disputes unsettled markets
Despite the slight recovery, trade conflicts and the slowdown in the global economy in 2019 weighed on the economic outlook for the euro area. The European Commission and the federal government only expected economic growth of around 0.5 percent in 2019. An increase of 1.0 percent is expected for 2020 – in 2018 it was 1.5 percent.
The possible Brexit and the trade dispute between the USA and China repeatedly unsettled the markets. One consequence: Gold made a comeback in 2019. It is considered stable. Unlike other forms of investment, however, it does not generate income. Investors benefit only when the gold price rises – and this is subject to fluctuations. Nobody can make a reliable statement about the performance.
Experts: There has to be some ups and downs
Investors should adjust their strategy to the low interest rates. According to Hartmann, shares with regular dividend payments are interesting. Precious metals such as gold, which often develop in opposite directions to stocks, can be added. After stocks, bonds and gold developed similarly in 2019, a broader portfolio will probably be more worthwhile in 2020, Bolsmann suspects. This makes it easier to compensate for fluctuations.
Oelmann also advises to mix different types of investments. “The so-called nest egg can still be deposited in the overnight deposit account, but there shouldn’t be much more.” According to Oelmann, passively managed index funds (ETFs) offer more returns. They track an index like the Dax and thus spread the risk more broadly than individual stocks.