Düsseldorf Whether it’s a crisis, a crash or a boom: Letting your savings work for you with stocks in innovative companies can be really fun. At the same time, ideally, a fortune is also created. If professionals let it be human by not hiding their own beginners’ mistakes, it becomes a really good advisor. In this regard, three new publications vie for the readers’ favor.
It is best to have a spark of fun and excitement with Pirmin Hotz, and that immediately with the first sentences. With good language and elegant style, the experienced asset manager gives personal insights into his first investment attempts. He reports, for example, how he welcomed his first customer in his pajamas early in the morning in his student shared apartment in the newly founded company for investment consulting. An embarrassing start to professional life.
The first experiences on the stock exchange were similar: he bought Kodak-Share certificates at a price of around 1,000 Swiss francs. A supposedly undervalued share that actually only rose, but then lost its price. Out of pity, the dear mother bought the ten shares at their cost price. “What a pathetic entry into my career as a stock market operator!”
The two unsuccessful appearances lift the – in the end of course successful – stockbroker off the podium. This creates closeness to experienced and inexperienced readers, and the entertaining examples make you want more. More rookie mistakes followed. According to the author’s own assessment, an average of eight out of ten stock market transactions soon ended with a profit. That could have been really good. Can.
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But, like many newcomers, Hotz initially sticks too much to the motto: “Nobody has become poor in profit-taking.” He is too quick to sell successful stocks with a profit of ten, maybe 20 percent. Meanwhile, a few deals go completely wrong, which has a detrimental effect on the overall balance sheet.
As a consequence, Hotz trusts the first thoroughbred professional and invests in high-risk warrants on the advice of a self-confident Merrill Lynch broker. So $ 75,000 temporarily becomes more than $ 90,000, but in the end just under $ 2500. And that with the borrowed money from the father.
Hotz wants to spare his readers all these experiences and therefore describes them in great detail before leading the reader into the large, expansive and more promising world of investors. Hotz skilfully draws the bow between passive and active investments on the stock exchange and dangerous cluster risks in the bond market, which is not at all secure.
Finding the right strategy
His disenchantment with seemingly tempting variable hedge fund strategies reads impressive. They rarely keep their promises with double-digit annual returns and are usually more unsuccessful than simple investments in the Dax in the form of a low-cost ETF.
Hotz’s gaze is on the big – including past crashes and the immense risks of losing a lot of money for a short time. Nevertheless, his heart beats for active investing in individual stocks. “I enjoy being the co-owner of a lot of great companies,” he enthuses. “With shares of Apple I finance my iPhone and with equity securities of the Swisscom my phone bill. When I’m sick, I use Novar‧tis pharmaceutical products, Roche or Johnson & Johnson one in which I am also involved. “
But which individual stocks promise the best return? For those who want it to be so specific, Peter Seilern recommends “The Best Shares in the World”. It is the extended translation of the title “Only The Best Will Do”, published in autumn 2019.
For almost as long as stocks exist, stock market gurus argue about whether “growth” or “value” is better. In other words, whether investors fare better with shares of rapidly growing (growth) companies, whose prices have often risen sharply – or with low-valued, high-value (value) shares, which usually slowly increase their profits, but are high and reliable Pay dividends. Seilern, an investment manager by nature, opts for a combination of both investment philosophies. It proves that this does not result in an average variety, but in added value. An optimal balance of return and risk.
Both works are in no way inferior to each other in terms of style and argumentation. Seilern skilfully refutes the widespread thesis that investors should prefer stocks in companies with high dividends and low valuation.
The opposite often turns out to be correct. The reason: high distributions indicate lack of ideas in saturated markets, low valuations signal an impending decline with subsequent loss of profit. In Seilern’s opinion, a fatal cycle that many growth companies will face in the course of their existence – including Apple, the world’s most valuable company, in view of increasingly saturated markets and offers from many competitors that are attractive in terms of quality and price.
The “Quality Growth Investor” created by Seilern invests his money in shares of companies with competitive advantages and strong organic growth. The companies must be able to expand their business model as steadily as possible and be at home in an industry that is growing faster than average. That is why areas such as utilities, banks, telecommunications, raw materials and airlines are ruled out for him.
It’s about companies that managed to consolidate their market position early on by creating a kind of moat around them to keep competitors away. This works best in industries such as IT, consumer goods and health. According to Seilern, out of a total of 50,000 companies from the 36 OECD countries – the states that rely on a market economy and democracy – only five to six dozen companies meet these criteria.
Find the worthwhile titles
According to him, these include a noticeably large number of family-run companies. Finally, he names a few companies that made it into his strict selection. For example the American payment service provider Mastercard, who benefit sustainably from the decline in cash and the increase in electronic payments. Or Estée Lauder in the beauty industry in view of the steadily growing Asian middle class and the trend to use more make-up.
At the end of the readable book, a few more stocks appear, including Adidas and Beiersdorf. The reader cannot fully understand why they also make it into the illustrious ranking. But that should only detract a little from the overall impression. The bigger gain is undoubtedly in how to find such long-term winning stocks.
There is no question that this requires sufficient prior knowledge and possibly in-depth databases. Therefore, the criticism of Christoph R. Kanzler seems appropriate, according to which no further book on capital markets and finances is necessary that was written by experts for experts and thus leaves most of the people out. The investment advisor claims to be explaining for the first time how capital markets work in a language that people understand: “This book is written for laypeople.”
As promised, the Chancellor does not use foreign words, technical jargon or anglicisms. A lot of advice comes across as refreshingly simple, for example when it comes to A for investment product, K for capital and Z for time. The investment in fund savings plans favored by the author is close to consumers from as little as 25 euros a month. Its rules such as “resist temptations” and “refrain from buying and selling wildly” are also beneficial.
But overall, the Chancellor does not fully live up to his self-imposed claim. On the one hand, there are already many stock market books for laypeople in simple language. And all in all, Chancellor conceals too many repetitions and generalities. For example, that the financial industry writes past people, or sentences like: “It’s about you as a person. You don’t have to be a banker. “
Much remains superficial, for example when it comes to equity and bond ETFs “that you can buy quickly and cheaply”. Kanzler explains how they work, but with classifications such as “Let me tell you, you can safely ignore the majority of these products”, it is too vague because he does not shed light on which products are good and which are bad. Chancellor’s book serves primarily as a first overview for newcomers to the stock exchange.
In any case, his mantra is correct: “It cannot go on as before.” This statement, which he relates to the pandemic, affects the entire investment in the interest-free times. These have existed since the financial and debt crisis. A good decade ago, the central banks felt obliged to lower key interest rates to zero and to continue buying their promissory notes from the states – with the result that investors no longer get anything for their savings.
But only Corona and the deep slump in the global economy lead more and more investors to believe that interest rates will remain very low for a very long time. That, in turn, makes investing in stocks inevitable and making corresponding advice so valuable.
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