Investors should stick to the basics of investing

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Course board on the Frankfurt Stock Exchange

Many companies listed in the Dax stock index have already recovered significantly since the Corona crash in March.

(Photo: dpa)

Anyone who has looked at the most important price charts in the past few weeks could get the impression that investors have already largely ticked off the financial consequences of the corona crisis. Compared to its lows this year, Germany’s Dax stock index rose again by more than 40 percent.

Nevertheless, confidence in the rally in recent weeks remains low. Rising corona infection numbers were enough a few days ago to temporarily push the Dow Jones significantly. Some investors speak of the “most hated stock market rally”.

Anyone who argues that the stock exchanges are just going crazy is making it too easy. Of course, it is correct that the current economic situation is cloudy and that many companies will pay lower dividends for this financial year. But it is not for nothing that the future is traded on the stock market – and it looks much more positive in the medium term.

From 2021, companies should start earning more than this year, there is a consensus. Until then, the programs of the central banks and states will ensure a high level of liquidity on the financial markets and stimulate growth.
No one can honestly say with any certainty how sustainable the current rally is against this background.

The recovery so far remains fraught with great uncertainty. The courses are primarily driven by liquidity – and a lack of alternatives. The multi-billion bailout packages will further increase government debt – and with it the pressure on central banks to keep interest rates low.

Spread widely, keep costs down, keep calm

The high number of infections in the USA and South America show, however, that the risk of corona is by no means averted. And investors continue to play a V-scenario on the stock exchange, i.e. a quick recovery, without it being clear whether the return to the old normality before Corona can really be sustained.

Investors should therefore say goodbye to the idea of ​​making particularly clever purchases during the corona crisis. Instead, investors should stick to the fundamentals of investing even in these turbulent times: spread the funds widely, keep costs low – and also keep calm.

For long-term investors, there is no way around stocks when investing, as long as there is hardly any profit on the bond market. But the Wirecard case in particular is a reminder not to blindly chase every hype share or every supposedly hot tip.

Star investor Warren Buffett put it in a nutshell: “The stupidest reason to buy a stock is because it rises.” This is especially true in Corona times.

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