Which is the right investment strategy for me?
Numerous studies and research have shown that determining the investment strategy is by far the most important success factor for long-term investment success. About 70-80% of the investment performance is determined by the investment strategy and its implementation (asset allocation).
Tactical measures such as profit taking and loss reduction determine around 15-20% of investment performance. The actual stock selection is responsible for just 5-10% of the long-term investment success. This is why the choice of investment strategy is so outstandingly important.
In order to be able to define the appropriate investment strategy, two crucial factors need to be considered.
The risk capacity
Over what period of time can the invested capital be waived or when exactly is some or all of the capital needed. Risk capacity thus refers to more objective factors such as investment horizon in terms of time and financial situation.
The willingness to take risks
How well can investors cope emotionally with temporary price losses? Risk appetite thus refers to more subjective factors such as the investor’s knowledge and experience, return expectations and investor behavior.
The old rule of thumb “100 minus your own age = current stock ratio” still proves its worth as a rough guide. In today’s world, however, this should be viewed in a more differentiated manner, since in addition to the desire for available liquidity, the optimization of the investment strategy from a tax perspective also plays a role.
Today, it is generally agreed in financial science that the equity ratio of a portfolio should be understood as a yardstick for determining the potential risk and thus also the expected return. The higher the share ratio, the higher the future price fluctuations are to be expected, but also the higher the return expectations may be. Many studies and calculations have shown that in the long term a stock return of 7-10% p.a. (depending on the market considered) was achievable. Another important factor influencing the investment strategy is the time factor. The longer the planned time horizon of the investment, the less significant are short-term price fluctuations. And the interest and compound interest effect plays all the more into the investor’s cards. Over the years, the effect becomes the investor’s most important ally. By analyzing several hundred private investor portfolios over the past 20 years, Genève Invest has developed four different investment strategies and set an equity quota for each accordingly.
An experienced investment advisor from Genève Invest can discuss the differences between the investment strategies with you in a detailed meeting and develop a suitable individual investment strategy together with you by asking specific questions.