Fear eats soul

In any case, the markets are pricing in that the central banks could be successful in slowing down growth – less so in curbing inflation. The Federal Minister of Finance has also switched to crisis mode and has already sworn in that the general public will expect three to five unpleasant years. All of this is increasingly leading to investors who are in the red becoming more restless. Anyone who has experienced constant ups and downs in recent years was still ahead with the most titles at the end of the respective year. So there was no reason for concern, and in this respect the assumption that everything could go on like this prevailed. By the middle of 2022, even risk-averse and broad-based savings plan payers are most likely to record losses; sometimes in the double digits.

Basically, all experienced market participants are now assuming that, regardless of the length and severity of the bear market, there will be another phase of rising prices and eventually new record highs. The only question is whether the individual has arranged his or her asset allocation in such a way that he or she can sit out the current lows calmly, or whether there is a need for active action? And even if someone is able to do it, because it always requires fresh money in any case, money management is not as trivial as some might think.

However, the practiced hypochondriac has an alleged advantage here: He knows himself, his behavior patterns, his fears and worries and reacts very sensitively to changes. It is now important for investors to think clearly and soberly about the goal of their investment strategy. Profit maximization is currently ruled out per se. But those who exit the market entirely may be missing out on some short-term returns. The observation that long bear markets have actually always been in recessionary phases may help in making a decision. So as long as there is some hope for the economy, there shouldn’t be a lasting market woe.

But: History also shows that market downturns are seldom slow. The stock market always falls faster than it rises. Investors should be prepared for further corrections and adjust their portfolios accordingly. And admittedly, successfully navigating this major recalibration in the markets is extremely difficult. Even if you’re doing your homework on company analysis, big macro development could throw you off. But you shouldn’t overdo it with the drama either: no clear-thinking person says the end of the world, who digitalization or the triumph of the classic oil and gas corporations, even if they are celebrating a resurgence on the markets. In addition, investors who still have 15 or 20 years to invest should be aware that phases of exaggeration in the markets always lead to opportunities.

Incidentally, the problem is not so much the mistakes that are made, but the constant fear of making them.

The German Derivatives Association (DDV) is the industry representative of the leading issuers of structured securities in Germany.

The above text reflects the opinion of the respective columnist. finanzen.net GmbH assumes no responsibility for its correctness and excludes any claims for recourse.