After our first eight articles, which shed light on the topic of “investing” from the general (“Why investing is better than saving”) to the very specific (“Buying ETFs: it’s this easy”), we think it’s the ideal time to summarize the most important findings for you. In line with our mission, we want our independent financial blog to provide as many people in Switzerland as possible with relevant knowledge on how to invest successfully and sustainably. For this reason, we have created a guide to investing from our first posts.
But for us, scientific also means recognizing that there is no guarantee that the (stock market) findings from the past, no matter how comprehensively proven, will necessarily apply to the future. Or in Mark Twain’s words: “Predictions are difficult, especially when they concern the future”.
We consider the media-pushed short-term forecasts regarding share price developments, which are made at the beginning of each year in particular, to be completely nonsensical and dubious. In this regard, the NZZ aptly sums up the dismal 2018 stock market year: “If the hefty losses are painful enough in themselves, 2018 is likely to be remembered by market participants for a long time, above all because hardly anyone had expected such an outcome at the beginning of the year. Back then, the experts were positive across the board.” As far as the past is concerned, we want to rely on empirical knowledge. This shows, for example, that globally diversified investments in equity ETFs have yielded substantially better returns than low-risk investments over the long term (see Figure 1). At the same time, we are convinced that the global economy will continue to grow in the long term as value creation and people’s expectations continue to rise and new markets are constantly being developed. For this reason, and assuming that investors are able to keep a cool head even in turbulent stock market times and do not sell their investments in a panic, we see no rational reason why high returns of around 9% cannot continue to be achieved in the future through scientifically based investing (see Figure 1). Expected returns in real terms for different risk profiles and equity shares (global portfolio)
Figure 1: Portfolios with different proportions of equities (i.e. global portfolio using globally diversified equity ETFs), based on the period from 1975 to 2010, adjusted for inflation, excluding costs and taxes, the historical returns are higher than the expected returns because the latter include a “safety margin”. Source: G. Kommer, Souverän investieren mit Indexfonds & ETFs, 3rd edition
So start using the following instructions to take your finances into your own hands and avoid losing money unnecessarily!
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Tip 2: Invest regularly
With regular, e.g. monthly, investments, you ensure a continuous build-up of assets and benefit from the compound interest effect in the long term. It is important that the fees remain as low as possible, even for smaller tranches. If you would like to implement your savings plan automatically by means of a standing order, without brokerage fees and from as little as CHF 100 across your entire portfolio , a robo-advisor could be an interesting savings plan alternative to a broker or neobank. In our Robo-Advisor Switzerland comparison with attractive starting balances, we tested three of the most innovative Swiss providers in detail. You can also find the most important results on our recommendation page. …
Tip 3: Read a good financial book
We have both read various books on the subject of “scientifically sound investing” and agree that Gerd Kommers’ standard work “Souverän investieren mit Indexfonds und ETFs: Wie Privatanleger das Spiel gegen die Finanzbranche gewinnen” is one of the best in this respect. You can order the book here free of charge.
