When it comes to the “right” timing for investing, we say: always NOW! And there are very good reasons for that.
Buy now! You know the slogan. It often comes with more or less convincing justifications for why the present moment is an especially good time to strike. When is the best time to invest? We're asked that very often. Our answer is: always now. Only in this combination does the answer capture some of the core ideas of our investment strategy.
Give return opportunities time
It's never too early to invest. Building wealth works particularly well when the investment horizon is long and the so-called compound interest effect can really unfold. The way reinvested returns act like a lever can be demonstrated especially well with savings plans. Here's a worked example for a savings amount of €150 a month: assuming a return of five percent per year, the accumulated assets add up to around €10,200 after five years. Ten percent of that sum can be traced back to returns. Over a savings period of 30 years, the assets come to €123,000. More than half of that comes from returns.
But a long investment horizon isn't everything. “Always now” is not good advice for every investment strategy. It only becomes so when the strategy is geared towards the broadest possible diversification, and combined with the principle of not relying on forecasts and “timing”.
A distinctive strategy
A company can drop out of the market, an industry can lose its shine, a region can slide into a lengthy crisis. So that risks like these have as little influence as possible on the portfolio, we pursue the goal of bringing the “global equity market” into our clients' portfolios. By deliberately taking into account five factors that can be classified as particularly relevant on a scientific basis, our global portfolio mirrors this global equity market quite closely.
So we don't rely on actively selecting individual securities. That would have to be based on assessments and forecasts about a future that is still unknown. We deliberately forgo that. Relevant analyses show that selection of this kind, as practised for instance by actively managed funds, owes its success more or less to chance. In any case, the names on the leaderboards keep changing.
It's not just selection: market timing too, the attempt to find the most favourable moment to get in and out, is, according to the findings of capital market research, purely a matter of luck. The problem: even if you happen to buy or sell at a favourable price, it can't be repeated systematically. For most investors, the biggest problem after getting out is getting back in. The best moments are quickly missed, which can have a marked effect on return opportunities.
The future is uncertain. What we do know, however, is this: over the long run, the world's stock markets have always risen throughout their history. That's no coincidence; it rests on a principle of the global economy. The global economy is geared towards growth, even if the ascent is interrupted by setbacks.
In short: according to the findings of research, a particularly broadly diversified portfolio is superior to other investment strategies in terms of the relationship between return and risk. That's why we trust in the strategy of investing permanently and globally, rather than betting on selection or supposedly favourable timing. And that's why, when asked about the best time to invest, we can answer with complete conviction: always now.
