Rick Lover



Which methods are important in fundamental analysis. P / E ratio and dividend yield are not everything: Buy low, sell high – the profit lies in purchasing. Easy said. But when is a share really cheap? When evaluating companies, professionals never rely on just one key figure. In addition to analyzing the company’s most important products, the market and the competitive environment, they scrutinize a whole bunch of fundamental data. Among the most important for value investors – in addition to the price / earnings ratio, earnings yield and dividend yield – the key figures:

  • Ratio of price to book value,
  • Course to sales,
  • Course to cash flow,
  • EBIT and EBITDA margin.

What is the price-to-book value ratio (P/B)?

The price / book value ratio compares the current share price with the book value per share shown in the balance sheet. In simple terms, the book value corresponds to the company value in the event of liquidation: liabilities and intangible assets are subtracted from the sum of the assets. The higher the value, the more expensive the company. A low P /B alone is not enough for a buy recommendation. Because it can have different causes:

  • The company is undervalued because it has not yet been discovered by institutional investors. Therelation between quotation and balance value is low.
  • The company’s return prospects are miserable. Then the relation between quotation and balance values also low.

A low P / B is therefore particularly convincing in connection with a low price-earnings ratio and a clear corporate strategy. As a rule, a company is valued favorably if the share price is below the book value per share (P / B <1).

What is the Price to Sales Ratio?

The P / E ratio provides information about how high a company is valued on the stock exchange . But not every company shows a profit. While the profit of a company can be embellished or diminished, the turnover can hardly be manipulated. To calculate the price-sales ratio, the price per share is divided by the sales per share. For example, company A has one million shares that are trading at $80.

Conservative value investors make sure that the price-sales ratio is not quoted higher than one. For many traditional brands, for example in trade, chemistry and automotive engineering, for example at Daimler, the price-sales ratio is actually lower.

The shortcoming of the key figure: The costs of the company are completely ignored. However, these costs have a major impact on a company’s profitability (EBIT margin). According to the strict price-sales ratio standard, high-performance companies with high profitability such as Apple or SAP would never end up in the depot. Therefore, the price-sales ratio should never be created solely for an investment decision.

What is the Price to Cash Flow Ratio?

The ratio of price to cash flow is also difficult to manipulate. The price to cash flow can be used in addition to the price-earnings ratio.

The term cash flow describes the inflow of money during a period. It marks the balance of deposits and withdrawals during a financial year. The cash flow is systematically higher than the profit, since taxes, interest and depreciation are not taken into account. The cash flow shows the liquidity of a company. The ratio indicates how high each liquid dollar is valued on the stock exchange. It is calculated according to the formula: price per share divided by cash flow per share.

What do the EBIT margin and EBITDA margin say?

The EBIT (earnings before interests and taxes) is calculated from the annual surplus before taxes and interest. The idea of ​​EBIT: The operating profitability of companies should be made comparable regardless of the capital structure. Because unlike the annual surplus or the net return on sales, debt or equity ratios do not matter. Depreciation is also taken into account in EBITDA. The EBITDA also enables companies that report under different laws to be compared. The profitability of a company is measured with the percentage EBIT margin or the EBITDA margin on sales. An example: With sales of 100 million and an EBITDA of 15 million, the margin is as follows:

Companies willing to invest often measure themselves by the EBITDA margin. This is especially true for companies from the technology or telecommunications industry, because they often incur high depreciation, which reduces earnings.

Over the weekend, Bitcoin briefly dared to reach the $58,000. However, the BTC bulls were not really able to counter the selling pressure, which is why the number one digital asset is currently trading just below it again at 57,200 dollars.

Regardless of the unimpressive price action, however, “BlockTower Capital” CIO and co-founder Ari Paul believes Bitcoin is in a full-blown bull market – and could increase in value tenfold within the next 24 months.

That would take Bitcoin to around $400,000 per coin based on current prices. In a new tweet, the blockchain investment firm CEO explains his take on the current bull run to his nearly 150,000 Twitter followers. Paul believes the bull market can last until the end of 2022.

With corresponding consequences for the bitcoin price: it could settle between $100,000 and $400,000, starting from its current price of $57,200. And: Paul believes that altcoins will do even better.

By that, Paul could mean that he thinks it’s likely to see returns of 1,000 percent or more on many altcoins. Paul:


The entrepreneur has expressed this altcoin optimism in previous interviews. In his estimation, simply buying and then holding coins like Bitcoin might be the best crypto strategy. Paul:


PlanB sees bitcoin at $100K or $288K.
In parallel with Paul’s bitcoin forecast, pseudonymous top analyst PlanB has also updated his bitcoin price target. He currently considers two variants likely: the S2F target at an average of $100K and the S2Fx target at an average of $288K.

If the bull run continues in 2021 and follows a price path like 2017, the S2F target takes hold and PlanB considers $100k per bitcoin likely.

However, the bull run could also be more similar to that of 2013. In that case, PlanB updated its Bitcoin S2Fx price target to $288,000.

Either way, a Bitcoin price target in the six-digit range still sounds like dreams of the future for many investors at the moment. However, the past has shown how quickly Bitcoin can rise parabolically in its valuation.

What is base rate? The key interest rate set by the CB is an important instrument of monetary policy. Is the CB lowering the key rate? More than once this question was answered with yes. But what actually is the key interest rate and what is the significance of cuts or increases? We look at the implications for monetary policy and private investors. We also show how the key interest rate has developed in the past.

Base interest rates play an important role in the monetary policy of every central or central bank. The base rate denotes the interest rate at which the central bank conducts business with commercial banks. It is set unilaterally, the banks only have the option to conclude deals or to forego it. The central bank thus influences interest rate developments and has an indirect influence on the banks’ deposit and credit policies. Strictly speaking, the term “the key rate” is a bit misleading. Because there are usually several interest rates or interest ranges in which central banks offer the credit institutions different types of business. Specifically, there are three interest rates at the CB:

The main refinancing rate: At this rate, commercial banks can borrow money from the CB for short periods of one week or more. When the key CB interest rate is mentioned, the main refinancing rate is very often referred to. It is the most important of the three interest rates and is the focus of public reporting.

The deposit rate: It denotes the interest rate at which banks can temporarily park excess liquidity with the CB until the next day. You are then practically yourself a short-term investor. This setting of interest rates mainly affects the investment and lending rates . The deposit rate is otherwise less considered, but it made a name for itself when the CB first introduced negative interest rates. In addition, the deposit rate represents the lower interest limit for the overnight money.

What functions does the key rate have?

The key interest rate is a key monetary policy control instrument. The banks base their conditions on the conditions for their own business with the central bank. The central bank is a key financing partner for them. If the key interest rate is lowered, this tends to lead to cheaper loans and lower interest rates on investments. The banks can then obtain more affordable liquidity from the central bank themselves and extend more loans. At the same time, they are less dependent on their customers’ deposits – because they can fall back on the money of the central banks. A rate hike has exactly the opposite effect.

The original function of the (key) interest rate policy is to secure price stability through low inflation. If the signs of inflation multiply, the central bank will raise the key interest rate to curb bank lending. At the same time, this makes spending more difficult for private households and companies. Reins are placed on excessive demand, the money supply becomes scarce and inflation slows down. Such rate hikes often take place in phases of economic boom. In times of economic downturn, however, the central bank tends to react by lowering the key interest rate to prevent deflation. In the worst case, a deflationary spiral occurs – a slide into a self-reinforcing economic downturn.

The ultimate goal of CB: to generate more economic growth to cope with the crisis.

Exchange rate effects of key interest rates: A further effect of interest rate policy can be exchange rate effects. Interest rate differentials are an explanatory variable for changes in exchange rates. Lower key interest rates tend to make one’s own currency “softer” because there is increasing demand for money from currency areas with higher interest rates. This also has an overall economic effect. Exports are favored when exchange rates are weaker and imports are made more expensive.

It should not be forgotten that changes in key interest rates also have an important signal function beyond their pure economic effect. They indicate the direction in which the central bank is moving with its monetary policy and how it assesses the economic situation. Exchanges register and “process” such signals with particular sensitivity. Moreover, key rate hikes are unlikely in the near future. The CB has made it clear that it intends to stick to its low interest rate policy and its monetary expansion for the time being in order to cope with the consequences of the corona.

What is the impact of the key interest rate on bank conditions?

Central bank dealings with the banks are short-term in nature. Accordingly, the key interest rates are short-term interest rates. Changes in key interest rates are therefore the quickest and most direct way of influencing conditions on the short-term money market. In the case of medium- and longer-term interest rates, however, the effect is not quite as “striking”. Changes in interest rates often only arrive with a time lag and are weakened. In the case of long-term interest rates, other influences are often also relevant for interest rate developments. This can mean that a key rate change “at the long end” is largely ignored, but it does not have to be.

Looking at the development of interest rates for various banking transactions over the past few years , the following can be determined:

The conditions for bank deposits (overnight money, time deposits, savings deposits) have reacted comparatively sensitively to changes in key interest rates – with resistance at the zero interest rate line. Negative interest rates in the banks’ deposit business remain the exception – despite negative interest rates for the CB deposit rate that have existed for some time. The overdraft rates react relatively sluggishly to changes in key interest rates and only move moderately.

The interest rates for installment loans have roughly followed the key rate trend – with a time delay and with a significant interest rate gap.

“One man’s joy is another’s pain”, this old saying seems made for changes in key interest rates. Falling key interest rates tend to make financing cheaper for borrowers. It then becomes easier to take out loans and bear the burden of interest and repayment. For investors and savers, however, it becomes less profitable to save in interest-bearing investments . Alternatives are required for investing – for example stocks, equity funds, ETFs or other asset classes. The stock exchange likes to react to interest rate cuts with “jumping for joy” in the form of price gains because companies benefit from lower interest rates. But that is not automatic. With higher key interest rates, the opposite is true.

The savings bonds is a one-time investment at a bank with which you can invest a sum of money for a specific term of one to ten years at a fixed interest rate.


The interest rate of the savings bond can be staggered over time: its amount depends on the selected term and the offering credit institution. In addition to the annual interest payment, savers can also choose the so-called accumulating investment. This means that the interest accumulates until the end of the term and is only then paid out.

Since the term of a savings bond usually extends over several years, this is referred to as a medium-term investment horizon. A termination before the end of the term is usually excluded or only possible with a loss of interest.

Possible goals: When can a savings bond be a sensible investment for me?       

Savings bonds are among the deposits. They are a way of saving if you prefer a medium-term investment. However, you should be sure that you will be able to dispense with the sum invested during the term. Because a prior disposal of the saved is only possible with a loss of interest or even completely excluded. However, it is possible to borrow a savings bond and use it as security for a loan taken out. A savings bond can also be an interesting form of investment if you want to build up assets or save something for your retirement provision .

Risks: What are the risks?    

Exchange rate risk / business risk: There is no interest rate risk as the interest rate is contractually fixed for the entire term of the purchase.

Foreign currency risk: This risk does not exist because you are buying the savings bonds.

Issuer Risk / Credit Risk: If you invest more than this, a risk may arise. Inquire about the deposit protection system of the bank or savings bank before concluding the contract.

Availability: You cannot dispose of the money early during the term. You can, however, borrow a savings bond and use it as security for a loan you have taken out.

Income risk: If interest rates rise significantly on the market, the saver will not benefit: because the interest rate and term are contractually agreed. This means that you are contractually bound to the lower interest rates and you cannot renegotiate any market-appropriate interest rates. But even falling or negative interest rates do not change anything in the agreed interest rate. In contrast to a fixed-term deposit, the savings bond can contain a so-called subordination agreement. This means that the statutory deposit protection does not apply to such a savings bond. If the bank becomes insolvent, you will not be reimbursed the USD 100,000 usually. “guaranteed. In addition, your claims from the bankruptcy estate will be treated subordinately. That is, other creditors will be compensated before you. For the higher risk, however, you usually get higher interest rates.

You should therefore check carefully whether a savings bond with a subordination agreement is suitable for you. Only entrust your money to providers whose seriousness there is no doubt.

What about the performance, profit and benefits of the savings bond?

Depending on the term, you will receive an interest rate based on the respective market interest rate, i.e. the refinancing rate of the credit institutions. You agree on this interest rate when concluding the contract. It is then binding for both contracting parties for the entire term. If the interest rate falls on the market or if there is even a negative interest rate, you can still be sure of the agreed interest rate until the end of the contract. Since a fixed interest rate has been agreed, you already know at the beginning of the investment what interest you can calculate with at the end. When buying a savings bond, there are usually no fees that reduce the interest gain.

NOTE: Bear in mind that savings contracts with longer terms bring higher interest rates, but you will only be able to dispose of your money after several years.

What obligations do I have towards the financial institution?    

As a saver, you generally have no particular obligations to fulfill. However, you must cancel your savings bond if the contract provides for an automatic new investment at the current market interest rate and you do not want this. Otherwise you cannot dispose of your money.

Where can I take out a savings bond?        

You can get information and advice in the branches of banks , but also online on the Internet or by telephone from the respective provider. You can then also conclude the contract for your savings bond there.

Exchange rate fluctuations are not only a source of annoyance in politics. Investors are also annoyed when foreign currencies lose value. Anyone who wants to successfully manage the currency risk in an international portfolio needs the right know-how – and a touch of tact.

Living in a counties that has powerful currency that tends to appreciate in value abroad is a fine thing. At least as a consumer. Imported goods from other countries become cheaper. And the cost of holidays abroad also continues to decrease the stronger the home currency becomes. For a consumer it is almost like being in a land of milk and honey: Purchasing power abroad is growing without having to pay anything.

The other side of the coin, however, is less positive. Because most consumers are also capital investors. And from this perspective, the world does not look quite so rosy: Those who invest abroad lose returns if their home currency rises or the foreign currency falls. With an exchange rate hedge, the problem should be resolved, one would think. But the solution is not that simple. Rather, managing currency risk properly is possibly one of the most complex problems in optimizing a portfolio. Because there are only a few generally applicable rules or principles of conduct.


The art of optimal exchange rate hedging is like a difficult balancing act. In some cases it is actually possible to use hedges to significantly reduce the risk of a foreign investment while at the same time achieving higher profits. However, the price for more security is often a lower return. Then it ultimately depends on the investor’s risk appetite and investment goals whether hedging is the right decision. The choice is often not difficult. Because in some cases, strong fluctuations in value can be dampened considerably with comparatively low discounts in performance. The market constellation is of course ideal for an investor if not using hedging is the optimal strategy. That also happens – and not too rarely.


Exchange rate fluctuations contribute between 16 and 40 percent to the overall risk of equity investments abroad. In the case of government bonds it is even up to 95 percent. The risk is usually measured using what is known as volatility . It indicates how much the return on an investment fluctuates around its mean.


What sounds plausible in theory, however, turns out to be a tough nut to crack in practice. The currency risk cannot simply be diversified away by holding different currency positions in the portfolio. This is shown by model calculations that compare internationally mixed equity portfolios with portfolios that only invest in one foreign equity market. The mixed portfolios contain different currency positions, the comparison portfolios only one.

Result: With exchange rate hedges, the volatility in the multi-country accounts can be reduced to a similar extent as in the accounts with only one foreign currency.


But such safeguards naturally cost money. They are only worthwhile if exchange rate losses ultimately exceed the hedging costs. It sounds straightforward and simple at first – but it isn’t. Because not only exchange rates are hardly predictable. The level of protection costs also fluctuates over time and is difficult to predict. In addition, these costs consist of three components: transaction costs, interest payments (in some cases investors also earn interest income) and lost profits (opportunity costs). The latter result from the hedge itself, because the investor does not participate in currency appreciations. The level of the opportunity cost, in turn – and now it gets even more complicated – depends on the relationship between the actual investment and the exchange rate. If both prices move in the same direction over time, economists speak of a positive correlation, a statistical measure that can be used to describe the relationship between two asset classes. If one price goes down when the other goes up, the correlation is negative. There is no correlation if no directional relationship can be measured and both courses fluctuate independently of one another.


It is generally not advisable to hedge against currency risk when buying securities in emerging markets. The reason is the high costs due to high local interest rates. For example, an American who wanted to hedge a plant in Brazil in 2010 had to pay 6.4 percent for it by the end of November – not counting lost currency gains (opportunity costs). 10-year Brazilian government bonds in local currency had a yield of 12.45 percent at the time. More than half of this would be consumed by insurance costs. Protection of the exchange rate is not advisable in the event of such disparities. As a matter of theory, for emerged markets and commodity currencies such as Australian and Canadian dollars, the following rule of thumb applies: they are high if the world economy expands well and faith is improved in foreign capitals. When on the other hand, at the height of the financial crisis in 2008, uncertainty or even hysteria breaks up in the stock markets, such monetary crashes with another stock market as investors exit. Foreign currencies that are viewed as a safe haven, such as the Swiss franc and the US dollar, are then in demand.


For government bonds from industrialized countries with good credit ratings, exchange rate hedging is clearly the first choice. Anyone who invests in such fixed-interest securities wants to achieve a largely secure return with them and put the entire portfolio on a solid basis. But in times of rising national debt in many developed countries, international diversification of the bond portfolio is becoming increasingly important. Foreign government bonds, however, harbor a considerable exchange rate risk because these supposedly safe investments can turn into risky currency speculation. Research shows that 95 percent of fluctuations in the yield on foreign currency bonds result from the high volatility of exchange rates. This is why the advantages of hedging clearly outweigh the disadvantages in this asset class: The volatility of foreign government bonds is falling significantly. The toll for this is slightly lower returns due to the cost of currency hedging.

What is fixed deposit?

As fixed deposit or time deposit money on the deposit accounts is called for, a period of time at a fixed rate is applied. There are short-term fixed-term deposits with terms from 30 to mostly 360 days and longer-term deposits with terms of up to ten years. It is not uncommon for time deposit accounts to be opened with a minimum investment amount, which often ranges between USD 2,500 and USD 5,000.

Who is fixed deposit suitable for?

Time deposits are particularly suitable for people who only invest a few years and do not want to take any risks. Because of the high level of security, the returns are usually lower than those of riskier securities. Fixed-term deposits are also a good building block for mixed investment portfolios.

Which term should investors choose for fixed-term deposits?

Usually within the negotiated time frame, fixed-term deposits cannot be cancelled. According to certain financial websites, in periods of very low interest rates it is best not to make fixed-term deposits for too long terms. Otherwise, as interest rates increase again and the market offerings get stronger, you couldn’t respond flexibly. That’s the reason. This claim is logical at first glance. However, after a closer examination, it proved to be a confusion.

In principle, short terms are advantageous when interest rates rise, and long terms are advantageous when interest rates fall. However, it is unknown how the interest rate level will develop after a fixed-term deposit account has been concluded. If interest rates are very low compared to the past, most people assume that interest rates will have to rise again in the future. But this is a mistake. Even if the interest rate level is already very low, it can fall further, as the past decade has shown. As early as 2007, many professional investors thought that interest rates could not fall any further. In fact, they continued to decline in the years that followed. In 2012, for example, at a very low interest rate level, it was advantageous to take out long-term fixed-term deposit contracts. Because interest rates kept falling.

Investment strategies with time deposits

Those who choose either short or long terms are also placing a bet on the development of interest rates. Investors who do not want this should spread their fixed-term deposits over different terms. With this system, often referred to as the “interest rate staircase” , you can quickly participate in rising interest rates and achieve an average return in the medium term. For example, divide into four equal parts the sum you want to spend. Spread the money over time deposits with terms of one to four years . In this way, a fixed deposit is due every year. If you invest the money again with a term of four years, this rhythm continues. Of course, you can also increase the term. This is especially worthwhile if the interest rate differences between the terms are large.

But there is a more convenient strategy than the interest rate ladder: You invest half of the capital in overnight money , the other half in fixed-term deposits with a three-year term or longer. With this strategy, the average interest rates are as high as with the interest rate ladder. When interest rates rise, the interest rate ladder yields higher returns because investors benefit from better fixed-term deposits every year. If interest rates fall, on the other hand, the overnight money strategy is ahead. It is also more flexible because half of the money is available at all times.

Investors have to cancel many a fixed-term deposit account

There is also an important difference at the end of the term. Some banks then transfer the investment amount and income unsolicited to the customer’s current account. However, you must terminate other contracts before the deadline expires. Otherwise, the bank or savings bank will reinvest the money with the same term as before – at the then current conditions. So that you are protected from surprises here, you should study the modalities before signing a fixed-term deposit contract. You should beware of combination offers. Some providers lure customers with high fixed-term interest rates and at the same time oblige them to buy other investments, such as a fund . Those who do not need such additional financial products should not be blinded by high interest rates. This also applies to other lure offers that are tied to unfavorable secondary conditions.

Diversify equity portfolios with currencies. In contrast to the international stock markets, there are always winners in foreign exchange trading – even in crashes such as during the financial crisis in 2008. Investors who use currencies skillfully in their portfolios can improve their diversification and increase their returns based on risk. This is shown by various studies.


But the recent financial crisis dragged almost all assets down. For example, stocks and commodities suddenly fell against each other. During the internet crisis at the beginning of the new millennium, commodities had risen when dividend stocks plummeted.

Of the asset classes that are also accessible to every private investor, only safe government bonds rose in 2008 (which most banks and asset managers had strongly advised against in 2007 due to low interest rates) – and some currencies. Investors from the euro zone were able to diversify their portfolio with Swiss francs (CHF), yen (JPY) and US dollars (USD).

Unlike other investments, there are always winners in the currency markets, regardless of the market phase. That’s in the nature of things: currencies can only be traded in pairs. Their value is always measured in relation to another currency. This relation is expressed by the exchange rates. If the value of one currency in a pair rises, the other must fall. That is trivial. But it makes it clear that diversifying a securities portfolio with foreign exchange can also work in a crisis – provided the right strategy is used.

Lower the risk in the portfolio with foreign exchange

In principle, the risk of mixed portfolios consisting of stocks and bonds can be reduced by adding currencies. This applies both to portfolios that only consist of securities in the home currency of an investor and to international custody accounts, as a number of scientific studies show. The volatility is usually used as a measure of the risk. It is measured statistically with the help of the so-called standard deviation. It indicates how much a variable, in this case the return on a portfolio, fluctuates around its mean value.

Of course, losses cannot be ruled out even with foreign currency in the depot. But they can be restricted. The price for this is a lower absolute performance. Measured against the risk taken, the return increases – the risk-reward ratio of a portfolio improves. A measure that is often used for this is the so-called Sharpe ratio. It sets the portfolio return above the risk-free interest rate in relation to volatility. The higher the value, the greater the return per unit of risk.

Investment specialists differentiate between passive hedging methods and active currency strategies. The latter either follow fixed rules according to which the individual currency positions are regularly adjusted, or a fund manager decides on the basis of an investment model which currencies are bought and sold. Passive positions and active strategies can be combined, which can lead to a further improvement in diversification.

Passive hedging strategies

Most investors have an internationally diversified share portfolio. It is a building block in an overall portfolio. Every investment abroad involves an exchange rate risk, but of course also the chance of additional currency gains. Most investors believe that just spreading the share capital across many countries reduces risk. At first, this also seems plausible. Surprisingly, however, there is no solid evidence for this.

The right currency positions

For mixed equity portfolios from these currency areas, long positions in EUR, CHF and USD and short positions in the other currencies tended to be optimal. A large long USD / short CAD position proved to be a particularly effective diversification instrument. If this currency pair is not available to an investor, the combination long EUR / short AUD is an alternative. These hedging positions work independently of the exact composition of a globally diversified equity portfolio, as tests show. The main reason for this is likely to be the high correlation between international stocks, which in the past rose even further during downturns. Investors who do not have the opportunity to have an optimal strategy calculated by their asset manager, for example, can only use their thumbs to gauge the extent of their currency hedging. Risk-minimizing investors should be well advised with a long USD / short CAD or alternatively long EUR / short AUD position of 50 percent of the equity portfolio. These positions should be checked at least every three months and closed in the meantime if the sign of the correlation should have changed. The best strategy for hedging foreign bonds, on the other hand, is straightforward. They develop relatively independently of currencies. Exchange rate risks should therefore be fully hedged. Another argument for this approach is the high volatility of currencies compared to bonds. In the case of unsecured foreign bonds, currencies contribute up to 95% to the fluctuations in value.


Inflation is causing your wealth to melt. Before the recent financial and sovereign debt crisis, the world was largely okay for investors. If you played it safe and didn’t want to take any risks, you could, for example, put your money in fixed-income securities such as federal savings bonds and federal bonds. Investors who bet on these securities receive regular interest payments and their money back at the end of the term. Interest rates were mostly above inflation, which measures the average increase in the cost of living. So investors received compensation for rising food prices, energy costs and rents. And the interest rate that went beyond inflation ensured steady growth in wealth. With federal securities, investors could maintain the purchasing power of their wealth and increase it at the same time. Those rosy times are long gone. Since the outbreak of the crisis, interest rates have plummeted. They have now reached historic lows. With federal securities, investors have long ceased to be green. These are the people who want the highest level of security today have to pay for it – with a gradual loss of wealth. Because many federal securities only deliver negative returns. In the case of bonds that still yield low returns, after deducting inflation and withholding tax, a real loss is also recorded annually.

The situation is similar for bank deposits such as overnight money and fixed-term deposits , savings bonds and savings books . In addition, banks and savings banks are no longer unreservedly viewed as a haven of stability, as they used to be. Financial institutions and, with them, entire states can get into dangerous difficulties.


Bad times for investors who have so far mainly focused on fixed-income investments and avoided risky papers such as stocks. Such an investment strategy, which was considered cautious until a few years ago, now harbors the risk of a steady loss of purchasing power.

Today more than ever, careful investment is a question of expectations: Someone who is convinced that paper money will soon be worthless is, from a personal point of view, behaving cautiously when investing the assets in gold, real estate, stocks and inflation-protected bonds. From the perspective of another cautious investor who believes in the continued existence of the international financial system, this strategy is tantamount to a visit to the casino. Because gold and stocks in particular, but also real estate, are risky investments.

Most cautious investors are likely to have at least one thing in common: for them, preserving their savings comes first. They want to avoid painful losses. But how to achieve this goal today- opinions differ. Extreme strategies, in which you put all your money into a single investment, perhaps for fear of a financial market catastrophe, are by no means the yellow of the egg. On the contrary: the risk of being completely wrong is considerable. One of the golden rules for cautious investors is never to put everything on one card. It is safer to spread your wealth across different investments, which include stocks. Because without the return opportunities that they offer, it is hardly possible to preserve your assets. It seems strange: But it is a consequence of the crisis that today, of all people, cautious investors can hardly do without shares.


If you divide your money into different investments, the chances are that some of them will always do well, regardless of what happens in the financial markets. A possible support for bond prices means limiting the losses that investors can make with bonds in the worst case. At the same time, the debtor states are guaranteed acceptable financing costs in this way. The dreaded downward spiral of rising interest rates and growing burdens on national budgets, which could ultimately lead to bankruptcy, appears to be broken.


Some investors fear that the states could reach into their bag of tricks and try to purposely increase inflation in order to pay off debt through higher inflation. In theory it is possible. In practice, however, it is not that easy to implement.

You can’t just make debt go away (if you can’t or won’t repay it). But you can put it into perspective without having to pay a cent from the treasury (read here how exactly it works ). Ultimately, it is not the inflation rate that is decisive, but the difference between interest rates and inflation, the so-called real interest rate.

Wealth keeps depreciating in value if the interest investors get is lower than inflation. In economic terms, your loss of purchasing power can also be interpreted as a redistribution from the investor or lender to the state, which gradually lowers its debt ratio without having to cut spending. Critics also speak of an “expropriation of savers”.

But how can a government ensure such redistribution? Either inflation would have to rise without the interest rate rising. Or the interest rate would have to fall while the inflation rate remains unchanged or increases.

Your investment goals

  • Are you pursuing special goals with your investment advice (e.g. building up assets in order to buy a property at a later date or to finance a degree)?
  • Are you interested in retirement provision, asset or liquidity accumulation or speculation?
  • How strong is your willingness to take risks?
  • Is the system subject to a time limit?

Your financial situation

  • How high are your securities assets, how high are your financial assets?
  • Do you have other assets ( e.g. real estate)?
  • What regular income do you generate ( e.g. salary, rental income, capital income)?
  • What regular obligations do you have ( e.g. rent, loans, maintenance payments)?
  • Your knowledge and experience
  • How well do you know about financial instruments and financial services?
  • Which financial instruments and financial services do you have experience with?
  • How long did you gain experience?
  • What amounts did you bet?
  • Do you have experience with investments in foreign currencies?

These are common questions. The advisor may also ask you for further information. You can also name other investment goals that are important to you. It is important that the investment advisor receives the most comprehensive picture possible through his questions. You should therefore answer his questions conscientiously and in detail and notify your advisor of changes or updates. Your advisor will only receive all relevant information through your cooperation. The investment advisor cannot and may not advise you without information about your investment objectives including your risk tolerance, your financial situation, your ability to bear losses, and your knowledge and experience.

What information does your advisor need to give you?

Before starting advice, you must be informed whether the advice will be provided as an independent fee-based investment advice. If this is the case, the consultant is not allowed to accept or keep any commissions, but has to have the advice paid directly by you. In the case of fee-based investment advice, the commission must be paid out to you in full and immediately. You need to get information about all the circumstances of the plant that are material to you. This also includes information about all costs of the financial instrument and service offered and their effects on the return. Donations, such as commissions paid by third parties, must also be disclosed.

This information must be printed out or made available electronically in front of your system, for example. If you request this, your advisor must also give you a breakdown of costs according to the individual items.

Your advisor is also required to provide you with an information sheet prior to entering into any trade in financial instruments. This provides information about the key factors of the respective financial instrument and contains, among other things, information on the type and functionality as well as the risks and costs. In the case of so-called packaged investment products, such as certificates and structured bonds, one speaks of a basic information sheet and, in the case of investment funds, of key investor information.

Which products can the investment advisor recommend to you?

Your advisor may only recommend financial instruments that are suitable for you. The recommended deal must meet your investment objectives, you must be able to accept the investment risks, and use your knowledge and experience to understand the risks.

What is the purpose of a declaration of suitability?

Every time you give investment advice, you must be given a declaration of the suitability of the recommendations – for example, printed out or electronically.

This declaration of suitability is intended to enable you to understand the reasons for the recommendation before concluding the contract so that you can make an informed investment decision. This means that you can immediately identify and address discrepancies in your information. Even after a while and for follow-up advice, you can still refer to the documentation and the reasons for recommendation given therein. You must also be provided with a declaration of suitability if you use the advice several times or at regular intervals or if you do not buy a financial instrument after the advice.

The contract for the recommended business may only be concluded after you have received the declaration of suitability. Exceptions only apply if the advice is given by telephone, for example, and you insist that the contract be concluded immediately. Then the consultant may provide you with the suitability declaration even after the contract has been concluded.

What other records are there?

If you give your advisor an order after the consultation, the time and place of the meeting, the people present, the initiator of the conversation and information about the order itself (such as price, scope and type of order) must be documented. You can request that this documentation be given to you. Companies can combine this information with the suitability statement. If advice is given or an order is placed by telephone or electronically, the company records the content (taping). They must inform you about this in advance. You can object to the recording, but then the company is not allowed to provide the service in this way. The company has to keep the records for five years. You can request a copy of the recording at any time.

Remember: your participation is essential! Check carefully that the documents are correct. In particular, you should carefully read the information about your personal situation, i.e. your investment goals, financial knowledge and experience, and your economic situation. Make sure to check whether the advisor has made the right balance between higher earnings opportunities and the safety of an investment.

Banks and asset managers are happy to recommend tangible assets when inflation rises or clients fear market crises. But gold, real estate and other real assets such as forests, airplanes and raw materials are not saviors. Some of them harbor high risks that investors should be aware of. When it comes to real assets, most investors think of gold and real estate first . But stocks are also real assets. They certify a share in a company and thus in its production capital, for example in machines, buildings, trademarks and patents. Gold and real estate in particular have enjoyed increasing popularity since the banking crisis of 2008 swept the globe and pushed a number of euro countries to the brink of national bankruptcy.

Banks and fund companies also promote a large number of other tangible assets. These include investments in wind parks, forests, arable land, dairy farms, infrastructure facilities such as ports, hospitals, retirement homes and day-care centers, diamonds, art, antiques, vintage cars and of course in raw materials such as oil and copper.

Real assets can protect against total loss in a crisis

The legitimate hope that such real values ​​will not become completely worthless during an economic catastrophe is linked. They are intended to help maintain assets in difficult times. Above all, they should protect against inflation , but also against the consequences of government bankruptcies and currency crises. In most cases, however, it is very questionable whether tangible assets are an effective insurance against rising prices, as numerous studies suggest. But in the event of extreme market distortions, at least in the past, investors did not suffer a total loss.

Inflation is eating away at nominal values

The owners of financial assets and government bonds fared much worse . Your savings vanished almost overnight. Cash, bank balances, and debt securities such as bonds are so-called face values. Their monetary value is fixed. The price at which a bond has to be repaid at the end of its term is determined when it is issued, as is the annual interest rate. These two sizes cannot be shaken. When inflation is high, with inflation rates higher than interest rates, the real money value of the bond, measured by purchasing power, falls. This can go so far that investors can no longer buy anything for the repayment amount, as was the case during the hyperinflation.

Cash is particularly vulnerable to inflation

Interest-free cash is even more susceptible to inflation than bonds. The nominal monetary value of coins and banknotes is set by law by the central banks. The purchasing power of these means of payment is falling in step with inflation.

While bonds are often backed by assets and the issuer’s economic strength guarantees their repayment, cash and bank balances are claims against the central bank. After the Second World War they were backed by gold in the Bretton Woods system of fixed exchange rates until 1971. Central banks could exchange US dollars for the yellow precious metal at a fixed ratio at the US Federal Reserve. Today, independent central banks guarantee monetary stability in industrialized countries. The money they issue is covered, among other things, by foreign exchange reserves, i.e. by claims against other countries. People trust that the central banks will not print too much money and thereby devalue it. But this confidence has apparently continued to decline after the Internet bubble burst at the beginning of the new millennium and in the wake of the banking and sovereign debt crisis.

The disadvantages of real assets

Compared to nominal investments, real assets seem to be something tangible. But if you take a closer look, you will also discover disadvantages and dangers, which often make an investment seem less promising. Many real assets are not liquid. This means that they are not traded on legally regulated exchanges. Investors cannot sell them easily at any time. This applies to real estate, forests, fields, aircraft, ships and many other tangible assets. In addition, very few investors are so rich that they can buy their own forest or a shopping center. Private investors usually have to invest in such properties through funds. These are mostly so-called closed investments , which are associated with high costs and risks. Investors should therefore avoid them. An exception are so-called private placements, which are not publicly advertised and well-heeled investors may only be offered under the counter.

Real values ​​are risky

For less wealthy private investors, it is more likely that there are real assets traded on the stock exchange: stocks,  gold and raw materials. However, such investments in real assets are sometimes associated with much higher risks than bonds from solid issuers or interest-bearing bank balances that are protected by the deposit guarantee. Shifts should therefore be considered very carefully. If, for example, you are not investing time deposits that have matured securely with interest and instead buy gold, you may have purchased good insurance against financial market disasters. At the same time, however, you expose yourself to considerable price fluctuations and a risk of loss that becomes greater the less likely a crash appears on the stock exchanges. The bottom line is that you may have exchanged a comparatively low risk for a significantly higher one. You should always remember when planning to move from safe assets to tangible assets.

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