Whether it’s high inflation rates or turbulent price movements: some people wonder whether, for one reason or another, they should change something about how their quirion portfolio is set up. Would a touch more equities be better now? Or is it time to play it safe? Here’s why your investment strategy has nothing to do with current prices.
A good seven and a half percent in June: the inflation rate in Germany remains high as ever — a challenge for building wealth. After all, investors want at least to preserve their capital’s purchasing power. Interest-bearing products continue to fall short as a counterbalance. True, key interest rates in the eurozone are gradually starting to move. But it’s a long way out of the low-interest environment and back to levels of earlier days. With equity investments, by contrast, investors share in the value the economy creates. That is why stocks can make an important contribution to protecting against inflation.
Risk is something personal
Quite a few investors therefore now ask themselves whether they should switch their strategy and increase their equity allocation — in order to improve their return prospects. The answer from our chief economist Philipp Dobbert is unmistakable: „Let me be perfectly clear: no!“ Equity investments, he says, are generally a good idea, and especially so when inflation is higher. „But inflation changes nothing about your personal risk profile.“
Return expectations and risk tolerance are in fact two sides of the same coin. Your risk profile is derived above all from two aspects. First: what share of your existing assets is the money to be invested? Second: how large may the fluctuations be that won’t cost you any sleep? Choosing a strategy is therefore about individual questions. Answering them requires no glance at prices or the news — most of the time that only distracts.
Strategy instead of tactics
Not orienting your risk management around current market movements is also at the heart of quirion’s investment strategy. „We don’t adjust equity allocations tactically in line with price trends or risk indicators,“ Dobbert points out. Because market timing — the attempt to find the supposedly best moment to get in and out or to reweight — doesn’t work systematically. „Capital market research keeps providing new and reliable evidence of that.“ Attempts at timing are useful nowhere: neither when investing in individual securities nor when choosing your investment strategy at quirion.
In nine strategy variants of quirion’s global portfolios, adding bonds is part of risk management. „We select the bulk of the bond investments not for their return, but because they reduce fluctuations in the portfolios. There is nothing better suited to that,“ Dobbert emphasizes. Regular rebalancing of the portfolios helps keep the risk profile on course. „Market movements continuously change the weightings, which is why we regularly readjust them to the target profiles we’re aiming for.“ So this is where quirion makes sure that the emphases within the portfolios don’t shift on their own along with price movements and without the investor doing anything.
Review regularly
When it comes to determining the risk-return profile, Dobbert generally advises investors to concentrate on the individual factors. Of course, these can change over time too. A pay rise increases your room for maneuver. If capital is needed elsewhere, your flexibility declines. It can also happen that, during the investment period, you notice you can actually handle larger fluctuations after all. „That’s why we ask clients to check once a year whether their assessments still match their circumstances in life.“ If you like, you can occasionally also go through the website’s application process as a test and see what comes out of it with the answers that currently apply.
By the way: whether in light of inflation or as a matter of principle — if you’re wondering how to make more of your money and would like to have your capital investments analyzed in one overall view, our investment strategists will draw up an individual assessment free of charge, whether for available funds or an existing securities account.
You can find out more about our free wealth check here.
