Investing is the new saving

Just as unexpectedly, the contemplation was over. Of course, my brother-in-law – whom I introduced a month ago – came up trumps with his great investments, with which he had supposedly made so much money. Funnily enough, the wine he brought with him wasn't necessarily the finest. But I digress.

I found it much more exciting that my parents-in-law didn't want to know anything about the stock market. 'Far too risky' said my mother-in-law and 'only for speculators', grumbled my father-in-law. This was demonstrated once again during the pandemic when share prices plummeted across the board. My objection that share prices are now higher than before the crisis didn't seem to impress them much. They must know that the parents-in-law's assets are in their property, a small part is in bonds and the rest is parked in their bank account as liquidity. In their eyes, their capital is therefore securely invested. Unfortunately, inflation is making a comeback and eroding the purchasing power of bonds and savings. Even a comparatively low inflation rate of 1.5%, as in Switzerland, eats up a fifth of purchasing power after 15 years. With a consumer price increase of almost 7%, as in the USA, this is the case after just three years. Bombproof my ass.

This is a nasty environment for cash or bonds. No wonder, as the latter have recorded some steep price losses this year. And what will happen to the value of the house if mortgage rates rise one day? So my parents-in-law's investments are not that safe. So just to spread the risk better, they should invest a portion in shares. In my opinion, however, the return contribution is just as important as the diversification. Bear in mind that over the past fifty years, equities have achieved an average overall performance of a good 7 % per year. No other asset class can keep up with that. So why give it up voluntarily? Sure, share prices fluctuate. But isn't it much riskier to watch your assets melt away than to invest them profitably?

With this in mind, let your savings work for you!

Yours, Mark Stock©

PS: Apparently my plea was not in vain: shortly after New Year's Eve, my father-in-law sent me a text message asking me how best to invest in shares. I think we're on the right track.

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.'