The fear of the corona virus has caused share prices to fall on the financial markets. Many investors are correspondingly unsettled and are selling their shares or are worried about their other retirement provisions. But is now the time for such decisions?
The essentials in brief:
- Shareholders should keep calm and not sell frantically. Equity fund savings plans as retirement provision should simply continue. Even those who have organized their retirement provision differently should, above all, decide calmly.
- But that does not mean that all investments should simply continue as they have been up to now. There are also options for change that in peace are worth dreaming about.
- Anyone who owns individual stocks should check their portfolio. By the way, individual stocks – regardless of Corona – are always a strategy with a higher risk than with equity funds.
- Caution also applies when dealing with gold as an investment and with unsolicited advice from advisors.
SHARE PRICES ARE ON THE MOVE
The stock markets collapsed worldwide in March as a result of the pandemic. In a short time, the value of the companies included in the Stock Market Index Share has fallen by around 40 percent. Even with global diversification, the losses meanwhile amounted to around 35 percent.
What is important for investors, however, is that this is irrelevant for a long-term investment strategy, provided the money is broadly spread across a large number of stocks from different industries and countries. The following applies here: buying and leaving it behind has so far led to the best investment results in the long term. In every case, you should pay attention to a long investment horizon of ten years upwards and broad diversification in your retirement provision.
If you have stocks, you shouldn’t sell them hectically. For example, if you invest in fund savings plans as a retirement provision , then a drop in prices in between is not a problem. Because at low rates you currently get more shares for the same money that you regularly pay into the savings plan – in other words, you even benefit from the rates that have fallen in the meantime. The decisive factor, especially with savings plans, is how the prices develop towards the end of the savings phase, when you then need the money, for example for your retirement.
But it is also decisive which products you have invested in. There are very cheap and good products, but also hair-raising expensive ones with questionable investment strategies. If stocks are generally an option for you, we only recommend stock ETFs. ETF stands for Exchange Traded Fund – an exchange-traded fund. One often speaks of index funds. A diversification across multiple asset classes makes sense for your retirement. Real estate or secure investment modules such as time deposits are a useful addition.
If you own individual shares in companies, you could check your portfolio because of the developments caused by the corona virus: Which companies could be particularly affected by the effects of the corona crisis in the future? For example, if you have shares in the aviation or travel industry, consider reallocating. But that also means that if the stock’s value is lower than it was when you bought it, you may be losing money now.
Only if you are now in urgent need of the money can you avoid any major losses by selling. If, on the other side, you can wait a while until the risk of infection has been averted by effective drugs and vaccinations, keep your shares – at least if you are still convinced of this company.
The gold price is already at a very high level
Investing in real assets such as gold is not a safe investment in the sense that the money will be paid back one hundred percent. In addition, the gold price is already very high. You should at most add five to ten percent to your depot as a buffer.
You can read more about gold as an investment in our separate article.
Be careful also with unsolicited offers!
Be critical and suspicious of unexpected contact via email, telephone or post. Also, be skeptical if friends and acquaintances send you links to YouTube videos that spread conspiracy theories and talk about the impending collapse of the financial system. Mostly wild theses are disseminated by apparent experts without any evidence, either to receive advertising income or to link to dubious investment opportunities that bring the senders commissions. Tips on buying gold or bitcoins in response to the crisis are simply dubious. Even if you assume that there will be government bankruptcies, that would be the wrong solution. Recently, criminals have also been sending more phishing emailsthat suggest a need for action where there is no one. You can also read up on how you can identify fraudulent providers from us.
But also brokers, finance and insurance brokers, employees of banks and savings banks take advantage of the uncertainty of some investors to reallocate products for commission or to sell new ones.
For example, you should be skeptical about such offers that are made to you without being asked;
- If a broker wants to apply for state aid for you in the corona crisis.
- If a financial advisor sees a need for private supplementary health insurance with the right to treatment by the head doctor in a double room or daily allowance insurance.
- If a bank advisor wants to use new legal regulations and optimize real estate financing.