Friday December 31, 2021
It’s going to be turbulent
This is how you will get a decent return in 2022
By Benjamin Feingold
No other event has brought more newbies to the stock market than the pandemic. This was ensured by the mixture of high inflation and a lot of investment time. And now?
All newcomers who have found their way onto the stock exchange since the beginning of the pandemic have one thing in common – they have not yet experienced a weak phase on the stock exchange. That has to be said in advance when it comes to the right mix of investments for 2022. As boring and stuffy as it may sound, the portfolio also includes safeguards and lifesaving ropes in the event that the stock markets dip. Put warrants are the magic word. That sounds really exciting. And the good thing about the turn of the year is that precisely those hedges are very cheap again.
The much-described tighter monetary policy of the central banks is becoming apparent around the world for the coming year. Still, some things stay the same. “For the time being, the good old savings book will not remain an option as a cash parking space. Inflation is at least two percent, and another one to two percent is incurred for bank fees and negative interest, ”says Thomas Meyer zu Drewer, Head of Public Sales at Lyxor ETF Germany. “The bottom line is that the loss of wealth for savers adds up to three to five percent per year,” he adds. In other words: if you leave 50,000 euros in the bank, you destroy 2,500 euros every year.
The situation is similar with government bonds. As long as inflation is above bond yields, this is positive for the state, as it apologizes. In contrast, investors have to accept negative real interest rates – interest income after inflation. This means that investors lose money even with bonds.
Shares are still in demand
In an environment of higher inflation, there is no getting around stocks as property, plant and equipment in 2022 either. The brokers are happy about this, because not only success stories like Biontech or the long-running Apple drove newcomers to neo-brokers or established addresses. The depot openings have been at a consistently high level since March 2020. Since many brokers also offer ETF savings plans, the entry barrier is sometimes also low.
But when do you access it? Entry opportunities open up when fears are played out excessively. After all, the merchant’s profit lies in purchasing. Courage is rewarded on the stock market, as the past few years have shown. Core investments via ETFs and index certificates on the Nasdaq 100, EuroStoxx 50 or S&P 500 form the basis of a solidly established portfolio and should make up 50 to 70 percent. Here, too, an important finding from 2021 comes into play: While numerous stocks corrected by more than 20 percent at times, the indices recorded only very minor setbacks of around five percent.
At the index level, the effects of the industry rotation usually offset each other well and dampen the fluctuation intensity in the portfolio. In addition, there are bonus, capped bonus and discount certificates, which often have a better risk-reward ratio than a direct investment in the underlying, especially if the shares only rise moderately.
Temporarily select safeguards
Around 20 to 30 percent are suitable for more speculative instruments, depending on your risk preferences. With the wide range of discount calls, turbos and inline warrants, investors are on par with the professionals. You shouldn’t miss out on safeguards amounting to around ten percent of the depot volume in order to sleep well when things don’t go well. The unusually quiet stock market year of 2021 is likely to remain an exception, sharper corrections of 15 percent at index level are common in a normal stock year and can be expected again in 2022. Classic put warrants, which are particularly cheap when nobody is worried, are suitable for this. An anti-cyclical strategy is therefore an advantage.
Gold and Bitcoin are repeatedly mentioned as a safe haven. The fluctuations in the digital currency in particular show that cryptos are more of a yardstick for the fear and greed of speculative investors. Only those who would like to gamble can use Bitcoin and Ethereum certificates. This at least eliminates the complicated opening of a digital crypto wallet, the papers can be traded every trading day. On the other hand, gold should not be missing in any balanced depot and should have a share of five to ten percent.
Benjamin Feingold operates the stock exchange portal Feingold Research.
This article does not constitute a recommendation to buy or sell gold, individual stocks or other financial products. No liability is assumed for the correctness of the data.