Security for TINA.
Stock strategy. Equities are indispensable in portfolio allocation today - There Is No Alternative (TINA). However, not everyone can live with the higher volatility of the asset class. The Lerbacher Runde explains how investors can effectively reduce fluctuations.
"Today, fixed-interest securities with a volume of around 17 trillion dollars are subject to negative interest rates worldwide," says Kai Röhrl, Robeco, and concludes: "Anyone who wants to maintain their capital in real terms and perhaps even generate capital growth must say goodbye to the classic portfolio allocation - 70 percent bonds and 30 percent equities.
"In this environment, stocks are indeed without alternative," explains Carsten Mumm, Donner & Reuschel. "We are already seeing that investors are now more open to increasing their equity exposure," says Andreas Rhein, Focam Family Office, "but the first price fluctuations quickly unsettle them and put their investment decisions back into question. That's why it's important to have strategies that reduce the volatility of the equity portion of the portfolio."
// Use diversification.
"The home bias can be observed all over the world," explains Röhrl. "Investors like to invest in domestic markets, in what they think they can judge because it's on their doorstep." In fact, according to Deutsche Bank estimates, German equities account on average for more than 50 percent of investors' deposits in Germany. "In any case, we recommend that you spread your equity portfolio globally and across different industries," explains Maximilian Kunkel, UBS Europe. "This reduces price fluctuations and opens up additional yield opportunities," adds Stephan Pilz, Sand & Schott.
This can be well demonstrated by correlation ratios. "The value of 1.0 stands for a perfect synchronisation of two markets. This coefficient is 0.76 for European equities and US equities, and only 0.57 for South American and US equities. Since the price development in different markets is different, the value of a mixed portfolio also fluctuates significantly less than the investment in just one region," explains Rhein.
"Another possibility for diversification is not to rely solely on the major indices," says Gottfried Urban, Urban & Kollegen Vermögensmanagement, "but it makes sense to add second- and third-tier stocks."
Andreas Rhein also advises investors not to look at the equity component alone, but always in the portfolio context. "Every investor still has bonds, real estate or alternative investments in his portfolio. Dadurch, the volatility of the pure equity component is relativized." Stefan Hollidt, portfolio specialist, also considers this context to be decisive. "After all, the right asset allocation can create a portfolio that can withstand the overall setback even in a crisis."
US government bonds are a sensible supplement to equities. "I have looked at the correlations over the past 50 years in stressful phases and found that there is no better diversifier," says Hollidt. "Whenever crises arose, an escape to this safe haven set in. Prices rose and dampened losses on other markets in the portfolio. My advice is not to hedge the dollar on this one. Because he also benefits in these situations."
// Choose stocks wisely.
"Why is real estate so safe," asks Gottfried Urban and replies: "One reason, of course, is that - unlike stocks - no daily market price is published for it. But just as important is the constant rental yield."
In fact, according to the professionals, investors should think the same way about shares and choose companies with a solid balance sheet and long-term stable annual profits and dividends. "Such titles are actually less subject to fluctuations over time," says Urban. "Investors can thus reduce the volatility of their portfolio simply by selecting the right shares," concludes Stephan Pilz.
"For investors," says Maximilian Kunkel, "the only relevant question really should be whether the investment pays an appropriate return in the long term. The current price then becomes irrelevant."
For Pilz, however, it is not just the key figures that play a role in the selection. "In times of disruptive change, the business model has to be analyzed carefully. Because only if this is future-proof will the company deliver the expected payout in the long term." "It's about picking out companies that can adapt to the current changes," adds Hollidt. According to Kunkel, this is where investments in megatrends can be made. "The four largest are population growth, urbanisation, ageing and sustainability. Daraus can then be used to derive further sub-topics. The shares of companies that benefit from such structural developments will also fluctuate in price, but thanks to their promising business model, they will recover faster and perform well in the long term."
// Insert options.
Price fluctuations can also be reduced by systematically selling call options. "This may mean that investors are cutting off a portion of the potential profit in the bull market. However, the additional yield generated in this way reduces the loss in the event of a significant setback," explains Kunkel. Many investors, experts have observed, on the other hand, would use options to limit losses. "But I don't think it makes sense at the moment. It only helps to keep the emotions under control. But in fluctuating markets it simply costs too much", Carsten Mumm analyses.
Instead, he advises investors to build up a strategic equity quota that they feel comfortable with, hold it for the long term and add a slightly higher cash position to their portfolio. "This offers the opportunity to operate cheaply on the stock market in times of crisis," says Mumm.
// Rethink equity investment.
"Ultimately, it would be the best safety net to provide investors with a basic understanding of equity investment," summarizes Rhein. "In fact, this could help investors to better classify fluctuations in equities and not get out immediately with every price loss," adds Pilz. It would also be helpful to assess each investment equally. "Even real estate prices fluctuate every day, investors just don't see it", erläutert Hollidt. "In addition," says Carsten Mumm, "it is important to bear in mind that although share prices can fluctuate sharply in the short term, the likelihood of losses in the long term is zero."
"I advise therefore everyone to see shares like real estates as long-term investments and simply not to look constantly at the price development , ergänzt Urban and schmunzelt: Nennen Sie Ihr Aktiendepot doch einfach Immobilie. ®