Recently, I was asked how to achieve a double-digit return per month... it can work, but it practically never does. When searching for fantastic returns, you mainly risk falling for charlatans or even making illegal investments like in a Ponzi scheme. In the end, a total loss is typical.
Risk and Return
With every investment, higher returns are associated with higher risk. If you cannot or do not want to take higher risks, you should refrain from investing. No matter how beautiful the return prospects, they never justify sleepless nights.
But how should you invest your money in times of negative interest rates and uncertain financial markets?
Keep an Eye on Costs
Before investing anything, you should be clear about the costs. Fees can eat up a considerable part of your investment success. Today, there are a variety of offers for accounts, cards, or even portfolios that can differ dramatically in price – it's worth finding an optimal solution here.
Tax Optimization
Another step is optimizing your tax situation. If you have enough liquid funds, paying into the 3rd pillar or even the 2nd pillar is often the best way to achieve an attractive return. The immediate tax savings often outweigh the costs and taxes when later withdrawing your pension assets. It's worth running through the whole thing with an online calculator.
The Right Investment Strategy
Now to the actual investments. Depending on your risk appetite and capability, you can aim for more or less return. In any case, it's important to invest in many different assets. Nobody can foresee the future and know whether a company, a bank, or even a country will go bankrupt – all of this has happened before.
It's best to develop an investment strategy and follow it consistently. This way, you won't be confused by short-term fluctuations and avoid making wrong decisions about the right time to invest – because here too: nobody knows the right time for an investment (not even professionals!).
The Power of Savings Plans
The most effective approach is to follow a savings plan where you continuously invest the free amount from your income and also reinvest the investment returns. Over time, you achieve maximum wealth building thanks to the compound interest effect.
Young people in particular have a long investment horizon and can therefore take greater risks, as they can ride out fluctuations, e.g., in equity investments, and ultimately benefit from a higher average return. The massive stock market losses of 2008 were recovered after four years.
Alternative Investment Forms
It can also make sense with a long investment horizon to invest part of your wealth in more modern forms of investment such as loans or others.
The Compound Interest Effect
It's important for everyone to seriously engage with their financial situation and investment topics. For example, it makes a big difference whether you invest CHF 10,000 for 30 years at 1% or 6%. With compound interest, you achieve CHF 13,478.50 in the first case and CHF 57,434.90 in the second case, more than four times as much...
Your investment specialist Michael Boge
