wealth management
wealth management
Podcast
23.8.2023
Although today's stock market seems modern, its history stretches back some 200 years, characterized by crises, upswings and periods of prosperity. And even if the past can never be transferred exactly to future scenarios, there are various principles that have proven to be effective in managing wealth as safely as possible and steering it through difficult times.
How have investors so far managed to maneuver investments through crises and allocate them intelligently? What warning factors can you look out for at the planning stage? Using the last few decades as an example, we would like to give you the most important investment tips below.
In the late fall of 1979, an interview with Nelson Bunker Hunt appeared in Welt am Sonntag. As a member of the richest family in the world at the time, who had earned billions in the oil business, he had a strong presence in the financial world. His recommendation: if you want to invest intelligently, silver is indispensable.
And at this point, he seems to be right: When the interview appears, the price of silver is already ten times its original value and rises by a further 50% in the following weeks. Investors are thrilled by the exorbitant returns and follow the billionaire's advice - until the crash. By March 1980, the price had already fallen by 80 %, leaving previously euphoric trend participants with heavy losses.
The reason? The US central bank raised interest rates in America from 10 to 20%, making any speculation on inflation impossible. While many blame Paul Volcker, the president of the central bank, the real fault lies elsewhere.
Together with his two brothers, Nelson Bunker Hunt himself was heavily involved in the silver trade. By buying enormous quantities of the commodity, they created a global shortage and thus artificially drove up the price. An undertaking that had to be undermined by stricter regulations and the change in interest rates, which the US central bank then did under its new president Paul Volcker.
This example illustrates how important it is to scrutinize tipsters. Nelson Bunker Hunt did not graciously share his financial knowledge as many assumed he would. Instead, he pushed his own agenda with his recommendations.
So if you get any hints about a unique opportunity, question your source and take a close look at the investment itself. Has the price already risen enormously? Are yields suspiciously high? If in doubt, rely on your suspicions and stay away from "too good" investments. In the long term, this foresight will pay off for your wealth .
What is shocking about many past crises is the government's involvement in them. For example, during the technological euphoria at the end of the 1990s, the government allowed companies to book payments to employees in the form of share options via the equity account. As a result, these were no longer visible in the profit and loss accounts of these companies, which led to significant misvaluations.
One example: Microsoft reported a profit of 4.5 billion dollars in 1998, whereas the company would have lost 19 billion dollars according to the correct accounting. This overvaluation as a result of overstated company profits demonstrably led to the stock market crash at the beginning of the 2000s, which cost many people their jobs or their savings.
Ideally, you should regard the state as just as much a source of advice as any other person. They also have their own interests and make recommendations based on these. So listen carefully, question their motives and - if you are unsure - act against them.
As shares and ETFs in particular are traded daily on stock exchanges, many people assume that this is a rather short-lived form of investment. This is one of the biggest mistakes you can make as an investor. In the field of professional investment, experts work with ten-year forecasts. The reason for this is as follows: Let's say you invest EUR 2 million in ETFs. One year later, there is a recession, share prices fall and suddenly the value of your investment is only EUR 1.2 million.
If you are thinking in the short term, you panic. You are afraid of losing everything and decide to sell your shares in order to get at least the remaining amount. So you are left with 1.2 million euros.
If you take a long-term view and act accordingly, you will naturally feel uncomfortable as you watch your wealth shrink. However, you know that crises also pass and keep your focus. In the following years, share prices continue to fall, your investments drop to EUR 0.7 million in some cases, but you remain calm. Finally, the economy begins to recover. Within a few years, it returns to its former level and subsequently grows beyond that. In the end, ten years have passed and your investment has risen to 3 million euros, which corresponds to an average profit of 5% per year calculated at the origin.
The difference between professional and private investors is that the former systematically factor in crises. So think in larger dimensions and don't let setbacks unsettle you.
The final indicator for or against certain investments is the general sentiment. In short: do not follow a trend that is too popular. Every crisis in the past was preceded by a phase of euphoria - before the silver crash, everyone invested in silver, before the dotcom bubble burst, everyone invested in technology companies. So if you notice a clear enthusiasm for a particular sector, it is advisable to keep your distance.
This point is very difficult to endure psychologically, as you may be watching other investors generate enormous returns for a while. But if the past teaches us one thing, it is that patience pays off in the long term.
In our masterclass on "Investment Principles", Chief Investment Officer and FINVIA co-founder Reinhard Panse gives a deep insight into his personal investment experiences over the last 3 decades. In addition to his handling of past financial crises, he will show you what you should consider when creating your investment process and how to navigate your wealth safely through all phases of the market.
wealth management
23.8.2023
Reinhard Panse
Find out first-hand which warning signals you should look out for and how you can assess market sentiment in order to make informed investment decisions.
Although today's stock market seems modern, its history stretches back some 200 years, characterized by crises, upswings and periods of prosperity. And even if the past can never be transferred exactly to future scenarios, there are various principles that have proven to be effective in managing wealth as safely as possible and steering it through difficult times.
How have investors so far managed to maneuver investments through crises and allocate them intelligently? What warning factors can you look out for at the planning stage? Using the last few decades as an example, we would like to give you the most important investment tips below.
In the late fall of 1979, an interview with Nelson Bunker Hunt appeared in Welt am Sonntag. As a member of the richest family in the world at the time, who had earned billions in the oil business, he had a strong presence in the financial world. His recommendation: if you want to invest intelligently, silver is indispensable.
And at this point, he seems to be right: When the interview appears, the price of silver is already ten times its original value and rises by a further 50% in the following weeks. Investors are thrilled by the exorbitant returns and follow the billionaire's advice - until the crash. By March 1980, the price had already fallen by 80 %, leaving previously euphoric trend participants with heavy losses.
The reason? The US central bank raised interest rates in America from 10 to 20%, making any speculation on inflation impossible. While many blame Paul Volcker, the president of the central bank, the real fault lies elsewhere.
Together with his two brothers, Nelson Bunker Hunt himself was heavily involved in the silver trade. By buying enormous quantities of the commodity, they created a global shortage and thus artificially drove up the price. An undertaking that had to be undermined by stricter regulations and the change in interest rates, which the US central bank then did under its new president Paul Volcker.
This example illustrates how important it is to scrutinize tipsters. Nelson Bunker Hunt did not graciously share his financial knowledge as many assumed he would. Instead, he pushed his own agenda with his recommendations.
So if you get any hints about a unique opportunity, question your source and take a close look at the investment itself. Has the price already risen enormously? Are yields suspiciously high? If in doubt, rely on your suspicions and stay away from "too good" investments. In the long term, this foresight will pay off for your wealth .
What is shocking about many past crises is the government's involvement in them. For example, during the technological euphoria at the end of the 1990s, the government allowed companies to book payments to employees in the form of share options via the equity account. As a result, these were no longer visible in the profit and loss accounts of these companies, which led to significant misvaluations.
One example: Microsoft reported a profit of 4.5 billion dollars in 1998, whereas the company would have lost 19 billion dollars according to the correct accounting. This overvaluation as a result of overstated company profits demonstrably led to the stock market crash at the beginning of the 2000s, which cost many people their jobs or their savings.
Ideally, you should regard the state as just as much a source of advice as any other person. They also have their own interests and make recommendations based on these. So listen carefully, question their motives and - if you are unsure - act against them.
As shares and ETFs in particular are traded daily on stock exchanges, many people assume that this is a rather short-lived form of investment. This is one of the biggest mistakes you can make as an investor. In the field of professional investment, experts work with ten-year forecasts. The reason for this is as follows: Let's say you invest EUR 2 million in ETFs. One year later, there is a recession, share prices fall and suddenly the value of your investment is only EUR 1.2 million.
If you are thinking in the short term, you panic. You are afraid of losing everything and decide to sell your shares in order to get at least the remaining amount. So you are left with 1.2 million euros.
If you take a long-term view and act accordingly, you will naturally feel uncomfortable as you watch your wealth shrink. However, you know that crises also pass and keep your focus. In the following years, share prices continue to fall, your investments drop to EUR 0.7 million in some cases, but you remain calm. Finally, the economy begins to recover. Within a few years, it returns to its former level and subsequently grows beyond that. In the end, ten years have passed and your investment has risen to 3 million euros, which corresponds to an average profit of 5% per year calculated at the origin.
The difference between professional and private investors is that the former systematically factor in crises. So think in larger dimensions and don't let setbacks unsettle you.
The final indicator for or against certain investments is the general sentiment. In short: do not follow a trend that is too popular. Every crisis in the past was preceded by a phase of euphoria - before the silver crash, everyone invested in silver, before the dotcom bubble burst, everyone invested in technology companies. So if you notice a clear enthusiasm for a particular sector, it is advisable to keep your distance.
This point is very difficult to endure psychologically, as you may be watching other investors generate enormous returns for a while. But if the past teaches us one thing, it is that patience pays off in the long term.
In our masterclass on "Investment Principles", Chief Investment Officer and FINVIA co-founder Reinhard Panse gives a deep insight into his personal investment experiences over the last 3 decades. In addition to his handling of past financial crises, he will show you what you should consider when creating your investment process and how to navigate your wealth safely through all phases of the market.
About the author
Reinhard Panse
Reinhard Panse is Chief Investment Officer and co-founder of FINVIA Family Office GmbH. Until February 2020, Reinhard Panse was a member of the Management Board and Chief Investment Officer for HQ Trust GmbH, which is owned by the Harald Quandt family. From 2004 until joining HQ Trust GmbH in 2011, Reinhard Panse was Chief Investment Officer of the UBS Sauerborn business unit created within UBS Deutschland AG. From 2001, Reinhard Panse was a member of the Management Board of Sauerborn Trust AG and its legal predecessors. He was responsible for the investment strategy and played a leading role in the holistic asset management and administration of large private assets. Reinhard Panse began his career by taking over capital market and client support activities at Feri GmbH in 1989, after having founded and managed his own wealth management as managing director.
