Private pension

Creating long-term wealth

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Author
Simon Herzer
1 min read

At times, the financial markets experience periods of considerable turbulence. Long-term investors who pursue a suitable strategy and observe certain principles should not get rattled by fluctuations on the stock markets.

The years 2019 and 2020 showed once again that the situation on the financial markets can change in the blink of an eye. 2019 was a year of records. All around the world, stock markets broke one record after another. This trend came to an abrupt end when the corona pandemic broke out. With stock markets worldwide temporarily plummeting by up to 30%, memories of the 2008/2009 financial crisis resurfaced.

Long-term investors should not worry too much about fluctuations on the financial markets. Nevertheless, they should occasionally review their strategy, especially at times when their situation in life is about to change fundamentally. Among other issues, they should ask themselves the following questions: Is my investment objective is still the same, does my investment horizon still match my selected investment products and are there any less expensive products out there? It is also advisable to constantly remind yourself of the principles of successful investment.

  • Diversify: A broadly diversified portfolio protects you against price fluctuations. At the same time, you increase your earnings potential. Funds offer the best opportunities for diversification.
  • Invest regularly: Use the average price method if you want to avoid investing at the wrong time. According to this method, you regularly invest the same amount over a longer period. In this way, the purchase price for fund units balances out over time: You buy fewer (expensive) units during a stock market boom and more (cheap) units when prices are low.
  • Be disciplined: Emotions are a poor advisor when it comes to investing. If you buy or sell assets in a hurry, you may soon regret your decision. Moreover, those who trade more often also pay more transaction fees.
  • Keep an eye on costs: Costs and fees play a crucial role in terms of successful investment. Higher costs reduce the return. It pays to look closely and pay attention to front-end and back-end loads. 
Author
Simon Herzer
Project Manager Communications