The 7 principles for successful investing

«Knowing what you are doing» is an important, perhaps even the most important prerequisite for long-term investment success: How risk-conscious investing works has already been discussed at an event for private clients. We showed that investment success is not only measured by the result - the return - but also by how it was achieved. Was the risk budget adhered to? Is the investment strategy right? Many investors are overwhelmed by the offers of the banks. Actually, they only want one thing: «Don't make any gross mistakes», and thus put their savings at risk. The fact that even the minimum investment goal - the mere preservation of assets - is not (any longer) risk-free due to low interest rates makes a conscious and systematic approach to investment risks all the more necessary.

The most important investor rules, in short:

1. Do not let yourself be guided by greed

Hardly anyone would describe themselves as «greedy» - and yet it is precisely this deeply human characteristic that is specifically addressed in advertising for financial products. Many investors are blinded by the prospect of a high, supposedly safe return and pay no attention to the costs or the hidden risks of the product. The calculation always works out for the providers. Therefore: Stay away from products whose risks you do not understand!

2. Give your assets a structure

Assets exist in two aggregate states: liquid and fixed. Firmly tied assets are those in real estate, retirement provisions or in one's own company. Liquid assets such as cash, shares, bonds or even gold can be sold at any time at market prices. The liquid part of the assets is invested, taking into account the total assets. «Many older married couples are over-immobilised» is something we see time and again. That is why real estate should also be included in the structuring of assets.

3. Define investment goals

Investing is not an end in itself. Investors should think about their financial goals. Examples are: the purchase of a home or a debt-free home, a money-free retirement, a trip around the world, wealth preservation or the desire to pass on one's wealth later (e.g. to one's own children or to the public), i.e. to leave an inheritance. In the current environment, goals are realistic if they can be achieved with a return of between 1% and 5% (status 2017).

4. Correctly assess your own risk budget

Nobody likes to lose money - but risk and return are inseparable. Where there is a return, there is always a risk. In order to generate a long-term return of 4 to 5%, an investor must be prepared to accept temporary losses in value of up to 40%; for a 1% return, this results in a risk of loss of up to 8% from today's perspective (status 2017). Experience shows that many investors expect a return which is too high, but are often not prepared to take the corresponding risk and thus overestimate their own risk budget.

5. Shares, bonds, cash: three investment categories are enough

From shares to certificates: there are countless investment options. OLZ recommends limiting liquid assets to the three main asset classes of equities, bonds and cash. Other alternative investments such as hedge funds, private equity, high yield or structured products hardly contribute to a better diversification of the portfolio, as their underlying risks are the same as those of the three core investments: equity and interest rate risks.

6 Diversify - but do it right

Holding one stock is highly risky, 30 stocks are too few for effective diversification, 150 stocks are too expensive and complicated to implement: efficiently diversified funds are the better and cheaper solution for private investors than buying individual stocks. We reduce the risk of the equity portfolio thanks to a systematic methodology to optimise diversification.

7. A higher share of equities with the same level of risk

With a risk premium of around 4% (status 2017), equities are the most attractive investment category. It therefore makes sense to keep as high a proportion of equities as possible for a given risk budget. This can be achieved through risk-based optimisation of the overall portfolio. In this way, the personal risk budget can be used optimally.

A lot can be gained with a good investment strategy and risk- and cost-conscious implementation. We are very happy to help you with this. But, dear investors, a word of advice in conclusion: Not every franc has to be invested profitably. Don't forget that money can also be spent - to give yourself or others pleasure. That, too, is a return.