Those who invest wisely in the stock markets can hope for significantly higher returns. Those who invest wisely in the stock markets can hope for significantly higher returns.
The essentials in brief:
- In times of low-interest rates, stocks can be a high-dividend alternative for your investment. However, stocks are subject to strong short-term fluctuations and therefore, also harbour a higher risk of loss.
- The following applies to stocks and investments: Don’t put all your eggs in one basket. So don’t bet on one or a few stocks, but spread your stock portfolio widely.
- We explain which investment strategy there is with one or more equity products and what is worthwhile for you when.
To be able to build up assets in the long term despite the current low-interest rates, many investors rely on stocks. A typical mistake when investing money in stocks, however, is a lack of diversification in the stock portfolio. On the other hand, if you invest wisely in stock markets, you can hope for significantly higher returns. We explain why broad equity diversification is worthwhile for you and what potential index funds have for your investments.
Shares: Rapid Losses And Price Increases
The history of the stock markets shows: the bottom line is that the long-term average returns are around four per cent higher annually than with safe investments. These include, among other things, a savings or call money account. If you want to invest in stocks, you should be aware that intermittent losses of up to 50 per cent are just as average as rapid price increases.
Spreading Risk Is The Best And Only Remedy Against Excessive Losses
The same applies to stocks as to investments: never put everything on one card! Unfortunately, so-called financial advisors still violate this rule far too often by selling their customers products that are too risky! The advantage of risk diversification: sometimes the stock markets are doing well, sometimes there is a lean period on the stock market for ten or 20 years. Then it is good to have substantial interest income from safe investments. If you want to buy stocks, you should therefore not rely on individual stocks and invest in one or a few stocks, but rather diversify your stock portfolio. That lowers your risk of losses.
Index Funds: Broadly Diversified In Equity Markets
One way of spreading risk is the so-called investment funds, especially index funds, because this contains a large number of different individual stocks (interest-bearing paper, shares, real estate).
Index funds (also called ETFs, Exchange Traded Funds ) map the development of stock markets worldwide. They are a rock-solid investment and are also well suited for retirement provision. Note, however, that ups and downs are unavoidable even with ETFs.
Risk Diversification In Stocks: Tips For Buying Index Funds
The cheapest way to buy index funds is through a direct bank. Index funds are not actively offered in the branches of banks and savings banks and by financial distributors because there is no adequate commission for the broker. If the independent search is too complicated for you and you need advice, speak openly with your intermediary about your concerns. There are also other globally diversified funds in the range of the consultants, which are more expensive but are often sold for a commission. In this case, at least negotiate the front-end load to reduce costs.
The independent financial experts at the consumer advice centres will also help you find the right investment for you.
DUBIOUS STOCK OFFERS: Warning against calling dubious stock traders
Beware, dubious stock traders have been looking for customers for a long time! The market watchman experts at the consumer advice centre Hessen warn of unwanted advertising calls from alleged stock traders. Shares from well-known companies – including Lufthansa, Siemens, Tesla and Amazon – are offered to consumers for purchase by telephone.