The international stock markets have suffered badly in the last few weeks and an end to the downward trend does not seem to be in sight. The corona crisis continues to keep the world in suspense. Many countries want to prevent the rapid spread of the new virus and with drastic means at the expense of their own economy. By the middle of the year, various experts are expecting another fall in the price of the markets of 15 to 25 percent. These are by no means rosy times for investors.
The first half of 2020 will therefore still be characterized by uncertainty, because nobody knows the concrete effects. How the coronavirus spreads and how the financial markets processed the situation and profit warnings from companies will also be decisive. When the number of new infections weakens, there will be a little more calm in the stock markets. After that, the central banks such as the Fed, China, the ECB and the Bank of Japan will continue to support the economy with more cheap money and financial injections and possibly also give companies additional support through new laws. This is likely to go hand in hand with a small recovery in the markets.
However, it may still be feared that some countries will slide back into recession as a result of the events of the Corona crisis. Problems on the stock markets could become worse again in the short term.
After the rain comes the sun
& nbsp; As with other stock market crashes that we have experienced in the past, the capital markets will recover over a medium to long-term period. Companies are being restructured, supply chains are being reorganized around the world, and investors are regaining the courage to make new investments.
The current problem for many investors in the capital market, however, is that most of them have no experience of a crisis and have not prepared their investment portfolios for a possible stock market crash. After all, we look back on 12 years of prosperity in the stock market. ETFs were the secret weapon to get rich without a clue. Spreading investments or investing in low-yield real estate or bond markets was not cool? Now there is panic because such a price fall came unexpectedly for many.
To put your mind at ease, I have put together my 5 tips for investors in a crisis.
1. Keep calm
The most recent downturns on the stock market have made it clear again: Anyone who invests in stock markets has to keep their nerves. Investors who act too quickly and rashly in such situations often do not achieve the desired profit, but pay a high price.
The prices on the stock exchanges fluctuate and are currently rather in the basement. This can be frightening when you look into the depot. However, we must not forget that as long as we do not sell the share or the fund, this loss is only theoretical. If you react too emotionally, then maybe you shouldn’t look into your portfolio for the next few months. Now it is important that fear of loss does not turn into panic. Instead, the maxim should be: wait and see and drink tea.
An investment portfolio should never contain only one or two stocks. Funds are always the better choice for most investors, as they are already widely diversified within the fund and invest in over 100 different stocks. But even within a fund portfolio you should diversify into different markets in order to have enough room for maneuver in crisis scenarios and to limit your losses. A secure base of real estate funds is recommended, supplemented by bond funds and money market funds, which can be used for reallocation and subsequent purchases in bad stock market times. If you also want to minimize the fluctuations within your investment portfolio, you can rely on mixed funds. That also saves a bit on the nerves.
3. Professional help
In the current times when the stock exchanges are in free fall, many investors are realizing that their ETF portfolio is not the secret weapon for getting rich quick. Therefore, find out more about independent investment advisors in your area. If the costs for investment advice are manageable and fair, then you should rather give the money you have saved up to the care of a professional who deals with the matter all day. Of course, even an investment expert will not be able to foresee a downturn in the stock market, but he will help you to set up your investment portfolio well for such situations. I would also be happy to help you with professional investments and the creation of a strategic investment strategy in the current Corona crisis.
4. Think long-term
In order to stick to your investment decision even in difficult times, it is also of immense importance that you define a fixed investment period that you do not change. You should stick to your plan, think long-term and not let yourself be guided by emotions. For a worthwhile investment in stocks or funds, a long-term investment horizon is more important than the time of the stock purchase. In the short to medium term, equity investors are at significant risk.
5. Do not operate market timing
The most important thing in falling market phases is to maintain your savings plans. Don’t try to find the perfect time to get started. This only works in the rarest of cases. Savings plans are emotionless and this is how investments should always run in a crisis. Feelings will only mislead you. You can of course top up your savings plans. At the moment, stocks and funds are bought with a 30 to 50 percent discount. Why not buy a little more of it. You usually do it in the supermarket too! Larger one-off investments shouldn’t be invested in all at once if you think the timing is right. He will not be caught! That is why I recommend simply distributing the selected sum over different investment times – preferably over a period of nine to twelve months in the current stock market situation.
Even if your investment portfolio is currently in the red, keep calm! It is best not to look into your investment portfolio for a whole year. Then the panic has flattened and the economy has recovered somewhat from the negative consequences and the shock.
If you are still unsure and would like to take advantage of professional investment advice, please contact me .
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