Investment in times of the corona crisis
The coronavirus crisis keeps the world under control. Many countries want to prevent the rapid spread of the new virus and with drastic means to the detriment of the economy. In this ambiguity, the stock exchange remains a minefield. For the rest of the world, too, experts have great problems grasping the extent of the crisis. We too prepare ourselves for 3 possible scenarios when managing our customer funds.
In one scenario, we expect the markets to fall again by a further 15 to 25 percent compared to the current level of the stock markets by the middle of the year. However, there should be a recovery in the second half of 2020. The magnitude of this will depend on how the stock market and the economy are trying to deal with the virus. Both the real economy and the financial sector are showing acute signs of stress. Supply chains have been disrupted and final demand has declined for many industries. Travel is sharply decreasing as both individuals and companies restrict movement. Airlines, hotels, cruises and casinos are reporting falling demand, lower occupancy and cancellations. Most of these points have already been realized by the exchange. There will also be major losses in the energy sector in view of the sharp fall in the price of oil. For long-term investors, however, this sector still offers a good entry point.
Only those who are independent
can make his own decisions.
In contrast to classic, purely monetary asset management, we understand asset structuring as an elementary component of comprehensive life planning. Always in line with your very own, individual goals and ideas. With this planning we want to accompany you trustingly and reliably to the best of our knowledge and belief.
As an active partner who is always at your side for dialogue and who always has an open ear for your wishes. Our goal is not your short-term profit, but your long-term satisfaction. We focus on security and flexibility when setting up our customer depots. These values pay off in the current time of crisis and offer enough room for maneuver to buy more when the markets are low.
Very important: We are not a bank and we do not have our own investment products. We are exclusively an independent investment advisor who designs asset accumulation and thus the future for and with clients. We will inform you about the best ways and possibilities for a successful capital accumulation and help you with every step. We look forward to the common path.
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In addition to the performance of the respective investment strategy, low fees are the decisive criterion for the overall success of your investment. Here, too, we are setting new standards as an independent asset manager: there is no front-end load that is customary in the industry when buying fund units with us. Depending on the product , you save up to 5 percent and more of the investment amount, benefit from a higher return, a stronger compound interest effect and greater flexibility.
In addition, as our customer, you can look forward to an extremely low annual service fee of only 0.5 percent of the current deposit value (plus VAT). We take this fee for our asset management pro rata quarterly from your custody account. Compare for yourself how attractive our prices are compared to traditional asset managers.
Expropriation through bail-in in the event of bank failure
I hate to paint horror scenarios and spread panic unnecessarily, but you should still find out about the effects of the “Bail-In Act” in the current situation. The correction on the stock markets was foreseeable. Only the time wasn’t certain. Here, too, things will look up again in the long term, even if we may have to stay longer than usual.
But how safe is your money on the overnight or current account? Now, at the latest, you should ask yourself exactly this question and act.
What does bail-in mean?
With the help of a uniform European resolution mechanism (Single Resolution Mechanism – SRM), troubled banks are to be restructured or wound up as planned in the future. The corresponding implementation in national law was passed by the German Bundestag in September 2015 within the framework of the “Reorganization and Resolution Act”. The central element of the SRM is the so-called “bail-in”, ie the participation of owners and creditors in the costs of winding up or restructuring a credit institution, even before state funds are used for this purpose.
This means that first of all the owners of the bank, mostly the shareholders, the creditors of any bonds issued by the bank, and if that is not enough, in the end the bank customers too have to be liable with their assets invested with the bank if a bank goes bankrupt goes. Therefore there is only a “deposit protection” of currently € 100,000.00.
In order to get an understanding of how bad things are in the banking landscape with us, the massive decline in the price of bank shares shows – important – even before the Corona crisis. The Deutsche Bank share has lost over 80% of its value in the last 5 years and Commerzbank is not in much better shape with a loss of over 71%.
It is therefore important that you position yourself correctly in advance. Do not buy individual bank stocks, bank bonds or bearer bonds from credit institutions and never leave more than € 50,000 in a bank.
Protect your money from bankruptcy
With your money in the current account or overnight money, you should make sure that your deposit at a single bank does not exceed € 50,000. In Cyprus in 2013 all amounts above € 100,000 were used to bail out banks. So we’ve had it all before. Again, do not tear out the upper limit of € 100,000. Laws can also be changed in times of crisis! So be on the safe side.
It is therefore better to distribute your capital among several banks than to keep an account with a high deposit at just one institution. A wide spread across different banks, especially savings banks and cooperative banks, largely protects you against such “bail-in” measures. The advantage of these banks is that they support each other and, above all, are hardly caught up in speculation.
Important: Measures in connection with the “bail in” laws only apply to capital invested directly with a bank. Your fund custody account or your retirement provision remains unaffected by a possible bankruptcy of the custodian bank or insurance company, because these are special assets and are your property.
So if you have too much money in a bank account, please split it up between several credit institutions or invest some in mutual funds. We also advise you on these topics and design security models for your money.
Stock exchanges in a corona panic: 5 tips for your investment
The international stock markets have suffered badly in the last few weeks and an end to the downward trend does not yet seem 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 do so with drastic means at the expense of their own economies. By the middle of the year, various experts are expecting another drop 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 support companies through new laws. This should then 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 worsen again in the short term.
After the rain comes the sun
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 assets 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.
2. Diversification
There should never be only one or two stocks in an investment portfolio. 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 use 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 the investment 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!
Larger one-off investments shouldn’t be invested completely at once if you think you have reached the right time. 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.
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We offer you a free and non-binding initial consultation. The purpose of the first meeting is to get to know each other, understand your situation and clarify general questions.
We work very transparently and explain our investment strategies to you in detail. Together with you, we will then design a concept that suits you.
With our products and concepts, we guarantee the greatest possible flexibility. Deposits and withdrawals are feasible at any time and investment concepts can also be adapted as soon as your goals in life change.