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Security through smart investment

The bad news is that all current investments that do not fluctuate generally currently bring less than the inflation rate and thus ultimately result in a (purchasing power) loss. So there is only the option to switch at least part of the total to higher-yielding stock market investments. However, this has the disadvantage that these investments fluctuate in value on each trading day and can also bring you considerable losses. Many investors still know this from their own bitter experience.

In the period between 1999 and 2002, the otherwise security-sensitive Germans finally dared to come out of cover. They went public and bought shares. Deutsche Telekom, Infineon and countless smaller ones attracted them Internet and IT companies with seemingly immeasurable price gains. You know the end of the story all too well: the speculative bubble burst and the former stock market winners lost 70, 80 or even 90 percent of their value, if not disappeared from the scene altogether. After these severe losses, the majority of the population then had enough of stock market investments. They would rather be satisfied with low interest rates than experience such a debacle again.

The only right measure: yield minus inflation rate

It would be wrong to just look at the interest rates when investing money. You always have to consider this rate of return together with the ongoing and mostly unnoticed loss of purchasing power of the money invested. A financial investment is only profitable if the return achieved (i.e. the interest rate generated by a financial investment) remains positive after deducting the current inflation rate.

Suppose you receive 1,0 percent per year for call money from your bank. Then the sad one is message: If the inflation rate is only 2,0 percent, and that is the optimal situation from the point of view of the monetary authorities, then you are making losses on the bottom line. With an inflation rate of 3 percent, which we have experienced often enough even in "solid" Germany, the negative Wealth effect even greater. Relative to one or two years, these losses are undoubtedly acceptable because they are negligibly small. But woe betide you do that for 10, 20 or even 30 years. Then you will find out: There is not much of your original money left, although the bottom line is a higher sum on the account statement than at the beginning.

How Inflation Affects

How does the purchasing power of 2 euros develop with a real return of minus 1 percent (3 percent credit interest minus 5000 percent inflation)? Look for yourself:

After one year, the purchasing power is only as much as 4900,00 euros today.

Saving definitely results in losses

In fact, the sometimes strong fluctuations on the stock exchanges - especially for security-oriented investors - do not sound like a desirable one Alternatives at. But anyone who knows that the alternative to the stock market, namely saving with insurance and bank deposits, definitely brings losses, while the stock markets do not, must come to the conclusion: Profitable financial investments without stock market investments are almost impossible these days.

The good news is it's up to you Handto reduce the fluctuations – and thus also the losses – or even to make a profit from them. The following three principles play a key role here: diversification, time of entry and investment horizon. Below are some explanations.

On the way to a responsible investor

If you now look at your starting capital, you will probably see two central ones Ask ask: What return (with what percentage profit per year) can I expect? And how for sure is an investment in stocks?

Our Objective is it that you are the most important Strategies and instruments of financial investment and become a responsible investor. To do this, you should use the main investment tools with their Power and weaknesses and also know which strategies your stock market success increase (dividend strategy, value strategy).

Investment no way leads past stocks

It's not about converting every free euro into shares invest. However, if you have set aside 10000 euros for your personal investment and not only want to preserve the capital, but are also aiming for a noticeable increase in assets, there is no way around stocks and stock funds from our point of view. To it again clear to say: When it comes to investing your 10000 euros in a profitable and liquid way, shares are an indispensable asset component!

This statement also applies not only in the current low interest rate phase, even though savers are currently suffering, but in every market phase. Shares (i.e. investments in listed companies Companys) are the silver bullet when it comes to investing small to medium-sized amounts of money with high returns. Who about a big assets like the stock market legend Warren Buffett, who we often quote, can also buy entire companies and thus acquire substantial returns.

But there is one more central point to consider: you should know why you will even be happy about price fluctuations on the stock exchanges in the future thanks to the average cost effect! Because an important finding is: price fluctuations, including downward movements, are not evil, but the friend of the far-sighted investor. So no Anxiety before entering the Welt of shares and Funds!

Invest wisely: 3 basic principles, without which it is impossible

You already know the bad news if you look at the sparse investment success of your bank accounts, capital life and pension insurance: All current investments that do not fluctuate and offer a high level of security currently generally bring less than the inflation rate and are therefore the bottom line for a (purchasing power) loss. So there is only the option to switch at least part of the total to higher-yielding stock market investments. However, these are subject to fluctuations and can bring you losses.

In fact, the sometimes strong fluctuations on the stock markets do not exactly sound like a desirable alternative, especially for security-oriented investors. But who knows that Age native to the stock market, namely saving with insurance and bank deposits, definitely brings a loss of purchasing power, while the stock markets do not, must come to the conclusion: Nowadays, a profitable investment without stock market investments is almost impossible.

Overview of 3 principles of action

The good news is that it is up to you to reduce the fluctuations - and with it the losses - or even profit from them. The following three principles play a key role here: diversification, time of entry and investment horizon. Here are some explanations.

1. Diversification: Don't put all your eggs in one basket!

It would be unwise to put your money in just one of the many types of investments that are available. In a bank account alone, it doesn't earn enough interest. On the other hand, if you buy a single share of your money, you can never know whether you were going to win or lose. Therefore, you should split your money:

2. Starting point: Don't buy everything at once!

Most stockbrokers rely on the right time to enter: "Buy at the lowest price and sell at the highest price, then you are always sure of profits!" So much for the frequently quoted one product, and there are legions of stock market analysts who do the Choice of the right time to enter and exit to a true science, without always being correct in their prognosis. Forget this recommendation! Because it can hardly be implemented properly.

The optimal entry and exit time can usually only be determined in retrospect - and then it is of course too late. It is much wiser, at least on average, to secure entry prices that are reasonably cheap and also to invest in securities with ongoing, relatively stable increases in value. The method of choice is called a "savings plan" and is a clever and simple one for both investment funds and shares Method to solve the problem convincingly with the optimal timing. You can read more about this in Chapter 9.

3. Investment horizon: just sit out short-term losses!

The following saying comes from stock exchange guru André Kostolany: »Buy stocks, take sleeping pills and stop looking at the papers. After many years you will see: you are rich. ”Not that Kostolany himself was too meticulous about his own advice - he was more of a speculator and was not so comfortable with long-term investments. Rumor has it that he lived less on the returns from his stock market investments than on what his celebrity status as a journalist and writer earned him.

His statement, however, contains a core of truth: stock market investments are above all successfully, if you, as an investor, have enough time and patience. Because no matter how much stock prices fluctuate in the short term, they rise in the longer term. So the longer you hold your stocks, the less likely you are to lose and the more likely you are to make a nice profit on the bottom line.