As life circumstances change, so does your investment profile. Time to change something about your own investment strategy at quirion? In which cases this makes sense, and why adding savings plans almost always pays off, is explained by our wealth advisor Nancy Guth from the Wiesbaden branch.
The certified bank clerk and bank specialist (IHK) looks after clients at quirion and at Quirin Privatbank from Wiesbaden. Meeting clients as equals, without having to “recommend” certain products to them: that is a key reason why Nancy Guth has been a proud “Quiriner” since 2009. Advising objectively and transparently is her aspiration.
At the outset, every client provides some personal information, for example about their risk appetite. From this the investment strategy and the ratio of equities to bonds in the portfolio are then derived. What are the occasions for thinking about a change of strategy?
When clients ask me about it, it's often about liquidity needs in the various phases of life. For instance, when they're buying a property. Or when clients are approaching retirement. In many cases it's also that, with their first investment at quirion, clients chose a somewhat more cautious profile because they weren't yet so familiar with investing through our digital wealth management. Once they see how our strategy works, they become bolder. Especially during the crisis, many people noticed that it works.
What if clients have the impression that the markets are changing – and therefore want to increase or reduce their equity share?
I do in fact get asked about that from time to time. Above all, of course, when things get turbulent on the markets. That's when clients ask me: should I react in some way? When it comes to a change of profile, I always first ask about the background. A change in your personal strategy makes sense when your life circumstances change. If it's only about what's happening in the markets, I usually advise against a change. At the core of our investment strategy is forecast-free investing. It's based on the scientifically grounded conviction that market timing – that is, the search for the right moment to get in and out – simply doesn't work over the long term.
You say that you “usually” advise against a change when the impulse comes from what's happening in the markets. In which cases would it still make sense?
It can of course happen that a client notices they are less risk-tolerant than originally assumed. That is, that they simply can't cope with the fluctuations. That's a question of self-assessment. But if neither your life circumstances nor your risk appetite has changed, you should stick with your investment strategy. It isn't derived from what's happening in the markets, but rather from criteria such as your investment horizon and your risk profile.
One occasion for a strategy change can be that retirement is drawing nearer. The common “rule of thumb” is that it's then mainly about drawing down, and no longer about building wealth. Given comparatively long retirement periods, is that still advisable?
Not necessarily. Many people neither want nor need to have access to all of the capital they've acquired right at the start of retirement. The average retirement period lasts around 20 years – so it can hardly be recommended to forgo market performance for that entire time. So it can pay off, for example, to take two paths: you can set aside part of your capital for gradual drawdown, because in old age your income is lower than during your working life. And in another pot you continue to build wealth. By the way, for retirement provision we have a product of our own with a special strategy, what's known as a glide-path concept. At its core, the ratio of equities to bonds here automatically adjusts over time to the investment goal of building wealth for retirement.
Aside from a strategy change: when does it make sense to add to your portfolio?
A savings plan always works, as long as you don't have to scrimp “the butter off your bread” to fund it. A savings plan can also be used as an addition to a quirion portfolio to try out a different profile. The cost-average effect ensures that, with the same monthly savings amounts, fewer units are purchased when prices are high and more when they are low. This alone cushions risks more strongly. As for adding to your portfolio in general: investing needs a goal, but not a “right moment.” That is always “now.” If your financial situation allows it, you should rather ask yourself why you aren't investing.
You can find more about quirion's savings plans here.
