Avoid difficult decisions
Very often I am asked about my favorite stocks? My answer to this is always the same: “I don’t have any – and neither should you.” Basically, one of the biggest mistakes investors make is to enter into “emotional relationships” with their securities. Too often and too quickly you lose your objective view.
Car values as an example
Many Germans love their cars – but their manufacturers have fallen out of favor. The emissions scandal and environmental headwinds have plunged German carmakers into crisis. In general, the overriding upward phases on the stock market have hardly been understood by the German car companies in recent years. Growth-oriented stocks with high market capitalization, on the other hand, lead the market. The big exception is the growth value and everyone is talking about it: Tesla!
While the automotive industry is changing towards electromobility and autonomous driving, German manufacturers seem to have lost touch. The corona crisis is also unsettling. Uncertainties caused by various trade conflicts are also a burden. Tesla, on the other hand, seems to be bucking this trend and is one of the favorites of many German investors. New and ever higher course targets are constantly making the rounds. Is there a risk of disaster or should one invest here? Basically wrong question!
Huge valuation differences on the stock market
With a market capitalization of currently around 510 billion euros, the company is currently worth more than two and a half times as much as BMW, Daimler and VW combined. The way into the leading index S&P 500 is paved and the ambitious goal of delivering 500,000 vehicles in 2020 is still within reach. Although the three German industry giants sold over 11 million (!) Vehicles in 2019, that is apparently not enough to win the favor of investors. Curious valuation ratios can currently be observed: A normal daily fluctuation of the Tesla share currently corresponds to the entire market value of Porsche.
Imagination and future beat the present?
The stock exchange ALWAYS plays the future! But opinions differ here. Will Tesla continue to soar or will the German auto empire strike back? Of course I don’t know either. Tesla polarizes. In a fundamentally rather skeptical stock market environment, investors are once again proving that in individual cases they do not shy away from boundless euphoria. Don’t let it infect you.
Diversification is the key
The change in the automotive industry is a difficult topic – especially in Germany, the automotive state – that is often discussed very emotionally. A real fan cult has developed around Tesla. Emotions should always be left out. Whenever individual values dominate the performance of your entire portfolio too much, you should check: Am I falling into an emotional trap and have I become resistant to warning signals? With a global orientation and diversification, investors do not make the mistake of focusing on a few individual stocks – even if that may feel right at the moment.
Look forward to technical progress and innovations on a broad front. Benefit from it and position yourself as broadly as possible. Betting on spectacular individual values and excessively high weightings in the portfolio almost always cause a high level of emotional pressure, which leads you to make wrong decisions. Avoid that!
You can request the current capital market outlook from Grüner Fisher Investments free of charge at www.gruener-fisher.de.
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