Dangerous stocks!

That – and much more – is what my parents-in-law told me recently. Well, for once they’re not entirely wrong, there really is a stiff breeze blowing on the stock markets at the moment. The toxic mixture of high inflation and a rapid slowdown in growth is certainly not fertile ground for price gains on the stock markets (did someone say stagflation?). Not even the good US Federal Reserve Chairman Jerome Powell can be relied on anymore.

Now, it is one thing to think that shares are risky – of course they are, otherwise their long-term returns would not be so phenomenal. But if, conversely, you think everything else is safe, then it becomes really dangerous. I don’t want to bore you with my parents-in-law, but while they consider shares to be highly dangerous, they can calmly invest almost all their assets in property, still have a fairly impressive mortgage and still be convinced that their savings are invested “conservatively”. Of course, they only believe this because “Mr. Market” doesn’t show them a price for their home every day. Otherwise their hair would stand on end (in the case of their father-in-law, rather sparsely).

It is naive to believe that the rise in interest rates has not affected the value of real estate. Just to give you an idea: Listed Swiss real estate stocks have lost 14% this year! But it is only when you are looking for a buyer that you notice the loss in value. And very few property owners realize that the fact that there is no daily price for their home represents an enormous risk. If I unexpectedly need cash, I can sell my shares immediately – sure, possibly at a discount, but I can liquidate them at any time. Try that with a house!

Do I hear the funny combination of words “safe government bonds”? Anyone who bets on bonds at the current inflation rates, which were last this high when Tom Cruise was not allowed to order a beer, can almost watch their assets evaporate. It is therefore not entirely surprising that bonds are also being badly ruffled. Globally, bonds with good credit ratings have fallen 13% this year alone.

I’m not sure which is worse: -20% for “dangerous” shares or -13% for “safe” bonds. We don’t even need to talk about Bitcoin.

Have I scared you now? Good! A little respect when investing is never a bad thing. However, panic is also bad advice. If you diversify your assets well, don’t speculate using borrowed capital and don’t buy anything you don’t understand, that’s half the battle. Because in the long term, assets tend to go up. The setbacks in between must be endured.

With this in mind, don’t be lulled into a false sense of security!

Yours, Mark Stock©

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”