If you entrust your suitcase to a safe deposit box, you pay a fee for its safekeeping. That is normal. Anyone who wants to invest part of their money at low risk has been confronted with negative interest rates ever since the SNB lowered the policy rate below zero. Even after six years of low interest rates, an improvement is not to be expected. More and more banks are lowering the exemption threshold without negative interest rates. What to do? In most cases, the following applies: The risk budget is limited and should not be exceeded; instead, it should be allocated optimally.
First-class bonds form the foundation
Security not only costs money, it also has value. Thanks to low fluctuation risk, bonds have an important function as a risk stabilizer in a portfolio. Moreover, since first-class government bonds have a low correlation to equities, these investments diversify the overall risk. They form the robust foundation and prevent the portfolio from wavering too much in the event of market turbulence.
Shares deliver the returns
Shares provide capital growth, i.e. the long-term return. The
historical risk premium is around 4%. It is worthwhile to select the individual
stocks in a way that they provide the best possible stability to the portfolio.
This is the goal of minimum risk optimization, which reduces the fluctuation
risk of a global equity portfolio by about 30% (compared to the market
index). A risk-optimized portfolio with
minimum fluctuation risk will grow stronger in the long term as it is more
resistant to market turbulences and crises.
Risk-optimized portfolios win over the long term
How much should or must capital grow? The first important step is to define one's investment objective. The smaller the risk budget (or the risk appetite), the stronger must be the foundation on which the equity portion is built. The advantage of OLZ Risk Optimization is that investors can build on equities even with a small risk budget. Risk optimization reduces equity risk and therefore enables a higher equity quota: e.g. investment strategies for pension funds with 40% instead of an average of 30% equities - or for private clients with a balanced risk profile with 60% instead of an average of 40-50% equities. The higher equity quota means a higher return potential at the same level of risk.