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Risk-conscious and disciplined through the crisis

Reading time 10 minutes

While normality is slowly returning to China, the rest of the world is holding its breath. One country after another is coming down: the economy, mobility, social life. For how long? Unknown.

An economy on standby, and this for weeks or months, is likely to leave a significant dent in the global growth path. It is not without reason that governments are now putting together economic stimulus packages and further monetary policy measures.

The situation on the financial markets has hardly changed compared to the previous week. Price fluctuations have reached a level last seen in the financial crisis of 2008. The very optimistic valuations of 4 weeks ago have now turned into pessimistic prospects for most companies. The sharp drop in share prices even implies valuations that assume that companies will not be able to pay dividends in the next 5-7 years. Above all, cyclical sectors such as industry and finance are losing ground, while defensive sectors have also suffered losses, but have held up comparatively well.

In this market environment, OLZ equity strategies were able to systematically outperform. The optimized stock selection and the more defensive sector allocation led to a cushioning of the losses.

The flight to the "safe haven" has also continued in the last few days. The addition of top-quality bonds paid off in this large and rapid correction. Bonds rose or at least remained stable, acting as an airbag for the entire portfolio.

In recent weeks, it has once again become clear how important effective diversification and strict risk management are. The OLZ stock and bond modules were able to meet the expectations placed on them and thus contribute to some stability in the portfolio. Compared to the market average, our risk-based approach helped limit losses.

If stock markets lose more than 30%, individual investors may also consider adjusting their investment strategy. As a specialist for risk-conscious investment solutions, we at OLZ have already experienced similar crisis situations in our almost 20-year history. This experience taught us that key aspects must be evaluated in a structured and objective framework when determining the investment strategy. The following questions can serve as a guideline:

  1. Has my risk capacity changed? The risk capacity depends on whether the personal financial situation has changed. Important: The risk capacity does not depend on the direction in which the stock markets are currently moving.
  2. Has my investment horizon in particular changed recently? Anyone who holds part of their assets in equities must keep a long-term perspective in mind. Within this perspective, there will always be smaller and larger fluctuations in portfolio value.
  3. Has my willingness to take risks changed? When markets fluctuate strongly, investors' risk aversion increases and their behaviour becomes increasingly pro-cyclical. This is definitely not a good guide for ad hoc adjustments to the investment strategy.

If you have answered all questions with "No", we recommend that you remain calm and consistently pursue your investment strategy. Within the framework of the OLZ mandate we guarantee disciplined implementation. Otherwise, we will be happy to be at your disposal (by phone) to evaluate any questions and key points of your strategy.

We wish you and your environment all the best and stay healthy!

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