There is a party atmosphere on the stock exchange, and there is dancing to music of the future. Most recently, Coinbase’s successful stock market debut fueled the hype. But there is no chance without risk.
What sounded like a Hollywood blockbuster a few years ago is almost a reality today. Cars will soon drive autonomously, taxis glide through the air and alternative currencies are emerging on the Internet, completely independent of central banks and governments. The future is getting more and more digital, and it seems to start right now.
So many exciting new trends, so many innovations, so many new companies and business models: Experts speak of nothing less than the fourth industrial revolution and many megatrends.
Of course, these stories also inspire stockbrokers, very much. Whether they are newcomers to the stock exchange with a rather pointed business model, the “Big Five” Apple , Amazon , Google mother alphabet , Microsoft and Facebook or even the electric car pioneer Tesla – everything that sounds like the future is in demand. Apparently there are no limits to the imagination.
Air taxi and crypto companies go public
With all of this, a lot may still seem a little futuristic. I don’t even want to imagine the journey or rather the flight with the air taxi to the main train station. The IPO of the Bavarian drone developer Lilium was earlier, even if it has not yet been officially confirmed.
Also the Bitcoin and other cyber currencies have been around for a while – and in contrast to air taxis, it is already taking off, flies from record to record. A beneficiary of this development: The crypto platform Coinbase , who has just completed a successful IPO. The coming months will show whether the euphoria will continue and where the course will develop. One thing is clear, however: The corona crisis with the many lockdowns around the planet has advanced digitization even further, the trend is irreversible.
As always with revolutions, there will be winners and losers. Old industrial groups have to change a lot or will disappear, but not every company that appears so innovative today will survive either.
The stock market expert
Jessica Schwarzer is a financial journalist, bestselling author and long-time observer of global stock markets. The German equity culture is a matter close to her heart. Her fifth book “So that she doesn’t have to fish for a millionaire …” was recently published. At t-online, she writes every two weeks about investments and financial trends that complement a broadly diversified basic investment. You reach them on LinkedIn, Twitter, Facebook and Instagram.
Investing in tomorrow’s Amazon today?
Therefore, where there are opportunities, there are also risks – also for stockbrokers. It would be sensational if we could rely on the “new” Amazon or Apple today, if we had the right nose and invested in a future giant at an early stage.
But unfortunately it’s not that simple. With all the enthusiasm for new technology, for innovations and for megatrends, you must therefore not forget one golden rule of investing: risk diversification.
With your equity investments – and with all other investments too, of course – you should spread the risks broadly. Diversification, as stock marketers call it, is extremely important.
Broadly diversified, never regretted
As a shareholder, you should therefore bet on many different companies from many industries, countries and regions. Smaller and larger companies, more conservative utilities or insurers – rather boring, but solid – and the young guns from technology or biotech – a little more exciting, but also riskier. You should bet on ten stocks rather than three, and better still on dozens or hundreds. Because then it hardly matters if you hit a rivet.
But who has the money to invest in dozens or, even better, hundreds of stocks? After all, the individual items in your portfolio shouldn’t be too tiny either. And who has the desire and the time to select them and then keep an eye on them? I definitely don’t.
The quarterly figures, the annual balance sheet, all the company reports, all the news and analyzes – there is a lot to process. This may be manageable if you only own stocks in three companies, but then your risk is not spread. With ten that would be more the case, but then it will be tedious, but at the latest with 30 shares you will probably lose track of things.
Invest in entire industries with ETFs
That is why I recommend exchange-traded funds (short ETFs), which replicate an entire stock index. With just one investment, I can invest in dozens or more stocks.
The following applies: It doesn’t always have to be MSCI World share index, the broad American S&P 500 or our domestic Dax. You can also rely on entire industries or special topics.
Sometimes it can also be actively managed funds. However, ETFs are cheaper and, above all, more transparent. Because with them you know exactly which stocks are in the index. A fund manager, on the other hand, usually only publishes the ten largest positions.
Small admixtures for the thrill
Anyone who wants to bet on one of the potential new stock market stars can of course still do so – but at best as an addition to the portfolio. Ideally, invest only small sums in individual values.
Incidentally, I personally have two deposits: The more important and larger one is the deposit for my long-term asset accumulation. There I invest according to very clear rules, and that very, very broadly.
But since I’m a passionate stockbroker, I like to try something out. I observe trends and find the many innovative companies that are currently going public that are very exciting. Sometimes I also invest. Because I have a second deposit, my “play money deposit”. Admittedly, that sounds a bit like a casino, but it is not really meant to be.
I invest smaller sums there, sometimes even buying a single asset – knowing that this has little to do with risk diversification and can provide a lot of thrills. But the reverse is also true: no risk without chance.