Should you invest in shares right now or not? This question is on the minds of private investors and those who would like to become one. But is there even a perfect time to buy shares? When it comes to becoming active on the stock market, laypeople are quickly confused. We at Point Capital bring light into the darkness.
Why do share prices rise and fall? Prices rise, prices fall – that's the normal course of things. But it is precisely this volatility that often puts potential investors off investing their money in the capital market. However, those who wait for shares to remain stable in the long term will never get their money's worth. The stock market inevitably involves constant ups and downs.
However, the decisive factor is not primarily how well a company is currently positioned economically. Shares are determined by supply and demand. In plain language, this means that the more willing buyers there are, the higher the share price rises and vice versa. This may sound simple, but it is not always rationally justifiable.
What exactly motivates investors to buy a particular share? For example, this could be new products that a company has just launched and which investors expect to generate high sales figures. Other possible motivations are
- current trends
- Well-established companies whose success investors trust
- Changing needs of society due to current events, which a particular company meets
As a rule, however, the share price is actually based on a company's successful business activities. Why is that the case? Surely you would be more likely to buy shares in a company that generates a lot of profit, wouldn't you? This is precisely the answer.
But sometimes something gets in the way of this rational way of thinking: the greed of certain investors. As a result, investing is often very emotional and seemingly not very fact-based.
When is the perfect time to buy shares?
Let's take a look at an example from 2016. At the end of April, Starbucks shares fell by around nine percent. The company had recorded a profit of around 16 percent. Why did the share price still fall? Because many investors and analysts had expected higher profits.
After Starbucks announced its sales, many investors bailed out and prospective buyers waited. And so it happened that the share price fell despite profits in the billions. This example alone shows how seemingly unpredictable the stock market can be.
There is simply no perfect time to buy shares. Numerous records prove this.
But investors need to bear the following in mind: The highest returns are achieved by those who invest their money for the long term – with a time horizon of ten years or more. And for long-term investments, the time of entry is insignificant anyway. The answer to the question of the perfect time is therefore relatively simple: now!
Does it really make sense to buy shares in the current situation?
The global economic situation had changed dramatically in part due to the pandemic, which made future investors take a wait-and-see approach. After all, nobody wanted to invest in a potentially sinking ship. However, even though the pandemic is not yet over, the initial slump in shares due to the pandemic has largely been made up for.
Enormous crashes like those at the start of the 2020 pandemic are no longer to be expected. Just think of the shares of travel companies. TUI's share price, for example, plummeted by over 70 percent. The period of such extremes triggered by the pandemic seems to be over.
Nevertheless, no one can guarantee that the stock market will go up again from now on. We at Point Capital cannot predict the future either. But we can advise you on how to invest your assets wisely. Because if you don't invest your money, you will not only miss out on good investment opportunities, but worse still: your money will steadily lose value – due to the current interest rate level and inflation. The message from Zürcher Kantonalbank is also fitting: 'Investing is the new saving'.
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- welche Kriterien wichtig sind bei der Aktienauswahl
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Patience is the key
Be aware of one thing at the outset: buying shares always involves a certain amount of risk. You won't make a big profit from one day to the next. As the saying goes: good things take time. And that also applies to the stock market.
Remain patient and don't be tempted to jump on temporary losses. Even the shares of the largest and most successful companies will fall at some point. But this does not mean you will go bankrupt. The magic word is: stability. Medium to long-term investments in shares are the safer option compared to short-term investments.
This means you are not forced to sell in a weak phase, but can sit it out. There is always the possibility that events will come knocking at the door that no one expected beforehand. Is an industry going through a crisis, are political conflicts affecting the economy or is a global epidemic breaking out?
Experience has shown that share prices recover and often reach new highs. In a nutshell: the longer the period over which you hold shares, the higher your profit is likely to be. This is shown by calculations based on the MSCI World Index:
The probability of a positive return is…
- after three years: 79 percent
- after nine years: 95 percent
- after 15 years: 100 percent
How can you reduce the risk of buying shares as much as possible?
Newcomers often have one thing in common: they like to bet on the biggest fish in the stock pool and leave it at that. Of course, it makes sense to focus on a growing and flourishing company.
Nevertheless, there is still a residual risk that business may not go so well. This can lead to losses or total failures, even for companies that could not have flourished more colorfully in the past. Nobody wants to be exposed to this risk.
It is therefore advisable to diversify. On the one hand, this includes a rough asset allocation according to different asset classes. In addition to equities, bonds, commodities such as gold and real estate can also be taken into account. In the case of equities, factors such as countries, regions and sectors should be taken into account in order to achieve a sensible spread of risk. In this way, you will not be hit by negative developments in certain economic sectors or regions in a concentrated manner, but can offset them with rising prices of other shares and/or investments if necessary.
Investment with Point Capital
Investing your own hard-earned wealth is never completely risk-free. At Point Capital, we give you security because we are co-invested with a large part of our family assets. So we handle your money as if it were our own. Added to this is our specially developed risk protection model.
We actively manage your investments and react immediately to significant market changes. We identify opportunities and risks at an early stage and thus achieve an attractive return in the long term. We are happy to advise you and explain every step of our approach in detail.
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