Your shopping cart is currently empty!
For their successful, good life Information you really need: Government-funded publisher, awarded the Global Business Award as Publisher of the Year: Books, Magazine, eCourses, data-driven AI-Services. Print and online publications as well as the latest technology go hand in hand - with over 20 years of experience, partners like this Federal Ministry of Education, customers like Samsung, DELL, Telekom or universities. behind it Simone Janson, German Top 10 blogger, referenced in ARD, FAZ, ZEIT, WELT, Wikipedia.
Disclosure & Copyrights: Image material created as part of a free collaboration with Shutterstock. Text originally from: “The Smart Investor's Handbook: Why Say No!” earns the most money and which major shareholders you can sleep with” (2016), published by Münchener Verlagsgruppe (MVG), reprinted with the kind permission of the publisher.
From Dr. Markus Elsässer (More) • Last updated on October 01.01.2023, XNUMX • First published on 11.12.2016/XNUMX/XNUMX • So far 6327 readers, 3666 social media shares Likes & Reviews (5 / 5) • Read & write comments
The best way out of the debt trap is not to get in the first place. Especially when it comes to investments.
Saving money starts with smart investments. It is worthwhile to set the course early for a lifelong economy. The approach "10 percent of the gross model" is a painless entry. It is tempting for entrepreneurs and investors to work with credit. But debtors live dangerously. My experience tells me: equity is better.
A young acquaintance, student of business administration at a well-known German University, told me recently about his second semester. We talked about entrepreneurship and how to start your own business. He proudly gave me the conclusion of his lectures on the subject Financing In any case, and without fail, the entrepreneur should always work with as much credit as possible and with comparatively little equity. He spoke of “leverage effects” and the great return on equity. I could hardly believe it. I was downright shocked. Also his older brother, who recently had a little Company founded in the media industry was flabbergasted. This theoretical nonsense is widespread. The dangers of borrowing are largely underestimated.
For me, debts are justifiable in two cases: First, when financing real estate with long-term mortgages. Although that is also a matter of taste. I know a lot of investors who basically pay houses without bank help by their savings to 100 percent. That makes you free and independent. And if one day you are confronted with a vacancy of the property and the rental losses drag on, you will not be asked to report by an unfriendly banker. In addition, when certain age limits are reached, for example to the 75. Birthday, the lending banks' propensity for loan extensions is declining rapidly.
On the other hand, credit financing for inventory and customer orders has been common practice with merchants for centuries. This is usually about short terms clear Calculable profit margins that are processed on a project-by-project basis. For the prudent businessman, the trade credit is a crucial tool.
In this case, the challenge for the merchant of these days lies in a different area: First of all, find a bank that will deal with goods at all Money borrows. An export merchant came to see me recently. He has years of experience doing business in Iran. After the cancellation of the political blockages he now wants to use his country contacts and boost the export business to Iran. Even with firm orders with really enormous profit margins, he cannot find a bank that will grant him 50.000 euros in credit (so much for the real effect of the central banks' zero interest rate policy to stimulate the economy!).
I advise against bank debt in almost all other cases. Basically, the compound interest effect is underestimated by borrowers. Loan rates that run against you and are not repaid immediately add up to large sums. For example, if you borrow 100.000 euros at 7 percent per year and want to pay them back after ten years, you will receive a final bill of 196.715 euros. It has always been this way: savers with reinvested interest or dividend income get richer over time. The loan interest payers, on the other hand, are getting poorer and poorer.
When I look for good companies in the stock market, I avoid companies with high levels of bank debt. I'm not so concerned about the interest effect. The independence and security of the respective stock corporation is important to me. During crises, it has been shown time and again how dangerous bank debt can be for companies. If overnight, as in 2008 and 2009, in some Industries the orders collapse, things get uncomfortable with the banker. Many entrepreneurs have told me that their Eyes and ears could hardly believe. The tone and atmosphere, once friendly and understanding, changed dramatically in the bank meeting room. The dear financiers of yore were hardly recognizable. The thumbscrews were applied. Of course there are laudable exceptions, but as a company leader I wouldn't hope for those.
The probability that, in the event of a crisis, the banks would massively interfere in the business policy of the Company intervened is high. I praise the Lindt & Sprüngli AG in Switzerland. In 2008, the Management Board announced in no uncertain terms that it would stick to its five-year investment program to improve production processes, despite the difficult and uncertain global economic situation at the time. I enjoyed that. The banks do not play a major role at Lindt & Sprüngli when it comes to financing issues. The company has a lot of equity, reserves from decades and a strong cash flow. That's what I like to look for as a stock market investor. I find the so-called »leverage effect« through the targeted use of borrowed capital on the one hand and a reduction in equity on the other to be too dangerous.
This is something for »SchönWetterSailors«. I don't go on board with them. My Capital these companies do not get on the stock exchange. As far as the investor is concerned, he too should reconsider his position. Investments at the stock exchange are always with us risks tied together. And even the best stocks, no matter how much equity and wonderful market share in their industry, can crash in price in a stock market panic. 50 or 70 percent and more in price losses, that has happened more often in the past - also for »blue chip« stocks. And that will always be the case. Because the share prices on the stock exchange are not based on objective evaluation criteria of what is actually available. No, theCourses are made purely by supply and demand. When nobody wants to buy, but others do merchandise then share prices collapse to zero. As unpleasant as it is when I have financed my deposit with my savings, I can sit out a phase of irrationality and madness. But with bank debt? How is it going to be on my nerves?
I therefore advise against Lombard loans, i.e. lending on a share portfolio in order to be able to buy more shares. No matter how low the loan interest rate, the stock investor is playing with fire. In the large Internet and Telekom Crash in 2002 and 2003 we had such cases. I know investors who, with good persuasion and applause from the bank, had borrowed 25 percent of their deposits at sky-high rates. By the time prices bottomed in March 2003, they had lost their entire fortune. Their shares were forcibly sold by the bank. That's the effect of Lombard loans: Debts remain or continue to grow due to interest charges, while Telekom shares, for example, fell from EUR 80 to EUR XNUMX at the time.
Regardless of Lombard loans, I say that those who have bank debts should generally not acquire a stock portfolio. First pay off your debts, save real equity and only then venture onto the trading floor. This is old fashioned and may take a few years of patience. In the next financial crisis you will (hopefully) think of me.
Acquire this text as a PDF (only for own use without passing it on according to Terms and conditions): Please send us one after purchase eMail with the desired title supportberufebilder.de, we will then send the PDF to you immediately. You can also purchase text series.
4,99€Buy
You have Ask about career, Recruiting, personal development or increasing reach? Our AIAdviser helps you for 5 euros a month – free for book buyers. We offer special ones for other topics IT services
5,00€ / per month Book
Up to 30 lessons with 4 learning tasks each + final lesson as a PDF download. Please send us one after purchase eMail with the desired title supportberufebilder.de. Alternatively, we would be happy to put your course together for you or offer you a personal, regular one eMail-Course - all further information!
29,99€Buy
If our store does not offer you your desired topic: We will be happy to put together a book according to your wishes and deliver it in a format of yours Choice. Please sign us after purchase supportberufebilder.de
79,99€Buy
Dr. Markus Elsässer is considered one of the best bankers and fund managers in Europe. Alsasser grew up as the son of an ambassador in London, Hong Kong and Paris. After a banking apprenticeship and business studies, he worked as an auditor before being voted one of Germany's top ten young managers by Manager Magazin in 1986. His industrial career began as Finance Director at Dow Chemical Germany, then he was in Sydney as General Manager for Benckiser and finally in Singapore working as Managing Director Asia-Pacific for the Storck Group. Since 1998 he has been an independent investor and fund advisor as well as the founder of the ME funds, which he has been in charge of for more than 14 years. For several years he worked closely with the well-known New York stock exchange trader Guy Wyser-Pratte. In 2012 he also founded the sports management company Rolfes & Elsässer with professional soccer player Simon Rolfes. He has over 40 years of stock market experience and is a consciously independent investor with great passion. His investment style is characterized by a deep understanding of the business world and its global interrelationships. As one of the very few, he combines practical management experience in industry, including in foreign cultures, with in-depth financial knowledge. As a columnist he writes for Wirtschaftswoche, the magazine BILANZ and as a guest author for wallstreet online. All texts from Dr. Markus Elsässer.
Post a Comment