Help, prices are falling

Dhe stock market year 2022 is not making it easy for investors. The price losses have been piling up since January. Above all, the previously popular tech stocks are under pressure. But shares that are sensitive to the economy don’t have it easy either. The war in Ukraine made the raw materials, which had already become more expensive, even more expensive. Concerns about the global economy are increasing. And so the stock indices are deep in the red compared to the beginning of the year, from the Dax to the Dow Jones to the MSCI World.

Sarah Huemer

Editor in the “Value” department of the Frankfurter Allgemeine Sunday newspaper.

Daniel Mohr

Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.

Anyone who thinks that gold at least proves itself as a crisis currency in times of need is mistaken. The price of gold is also 10 percent below its March high. Bitcoin, seen by some as the modern gold, currently offers no protection against crises. On the contrary. Prices have more than halved since the fall. And the upcoming turnaround in interest rates is keeping the bond market firmly in its grip. Prices are falling, bond funds are in the red.

So what to do? sell everything? And leave it in the checking account and wait for the storm to pass? Or should you use the fallen courses as an entry opportunity? Or turn your back on the entire capital market because in the end there is nothing to gain for the small private investor and would you rather buy a beautiful holiday property on Lake Constance?

Patience is required

The situation is not easy, and for many investors it is brand new. The stock boom of recent years has produced a whole new generation of investors who are actively involved in stocks, have started ETF savings plans and share stocks on Instagram.

“I’ve never noticed a market situation like this,” says Samuel Wardrobe. The 23-year-old has bought shares for the first time in recent years. Especially during the pandemic, many people discovered the stock exchanges for themselves. After a Corona scare in spring 2020, the stock markets have developed well.

In January, the Dax recorded a high of 16,290 points. Now less than 14,000 points remain. The nervousness grows. Only four of the 40 Dax stocks have been up since the beginning of the year. Most, on the other hand, are heavily in the red, especially tech stocks like the food supplier Delivery Hero at a discount of around 70 percent, but also stocks like Deutsche Post with a minus of 33 percent. You’re in good company with losers like Apple, Alphabet, Amazon, or Tesla.

For many investors, it is the first minus in their own portfolio. So it’s high time to pull the ripcord before even more money is gone? The question goes to the very essence of investing. Is it better to stick with one strategy over the long term, or is it worth making regular adjustments and shifts?

In the graphic, we calculated the Dax back to the beginning of 1971. At that time it was around 500 points, in 1988 when it officially started it was 1000 points, today it is around 14,000 points. Whoever stuck with it, gets an 8 percent return per year including dividends and before taxes. That’s a return well in excess of inflation over the years.

If you try to avoid market setbacks, of which there were undoubtedly a lot, by selling shares in good time and then getting back in, you have to be very lucky to be successful. Fear, even panic, often throws a spanner in the works. Investors typically do not sell their shares when the Dax is high.

What is the right time?

The experiences of a 42-year-old computer scientist are exemplary: In March 2020, when Corona was just chasing the first shock waves through the markets, he had sold all the shares. The Dax had dropped towards 8000 points. It’s not going to end well, he said. Only a few thousand Dax points higher did he have enough confidence again to re-enter the market, only to be afraid for his money again after the setback and to think about holiday properties.

Anyone who believes that the turnaround in interest rates, the Ukraine war, the supply chain problems and expensive commodities will bring stock and bond markets to their knees can sell and re-enter later. Only: will he ever find the right time to return? And will it really be cheaper then than it is today?

Market timing is an almost impossible task. Because there is no certainty: will share prices always fall when there is a turnaround in interest rates? no To what extent is the central bank’s withdrawal of liquidity still bringing the markets to their knees? Not clear. What will the global economy do in 2023? The crystal ball is just a little blurry.

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