FINVIA
FINVIA
Podcast
23.1.2023
You have a considerable wealth and are aware that a careful investment strategy is crucial not only to protect your money, but also to increase it. However, you do not want to blindly invest your wealth in just any investment products. The design of your portfolio is essential in order to minimize your risk and achieve your investment goals.
To help you invest your wealth correctly, we have compiled the top 5 tips from the world's most successful investors. This will help you build a future-proof investment strategy from which your wealth will also benefit in the long term.
From the importance of diversifying your investments to considering your risk appetite and the long-term outlook for your portfolio, these tips will help you grow your wealth safely and successfully.
Together with the Handelsblatt Research Institute 2022, we asked ourselves an important question: "How do Germans manage their wealth?" The resulting study surveyed 300 people aged 18 and over with total assets of at least 500,000 euros who also own or use some form of investment product, for example shares, building society savings contracts, fixed-term deposits, savings accounts or an ETF. The study shows that the majority of wealthy Germans invest mainly in shares and real estate.
Reinhard Panse, Chief Investment Officer of FINVIA Family Office GmbH, attributes this to the lack of knowledge among Germans when it comes to finance. In Germany, the most important basic prerequisite for developing a strategy is less common than in comparable countries: namely appropriate knowledge. Here, hardly any useful financial knowledge is taught in schools. As a result, Germans are apparently unaware of how risky fixed-interest investments in highly indebted countries are in the long term. Germany is the only major industrialized country in which investors have lost almost everything twice in the last hundred years with this form of investment due to the high level of debt caused by the world war."
The conclusion: less wealth also means less experience with investing and therefore less know-how that can be passed on to the next generation. As a result, investments are increasingly being made in asset classes that require a low entry threshold.
According to Reinhard Panse, the financial industry does not help with this knowledge gap either: "The financial industry is not helpful for many investors here, as it is still - at least in part - focused on product sales. The objective development of a long-term investment strategy tailored to the investor's needs is unfortunately a rarity.
You can find the complete study here.
As a result, there is a widespread misconception that most Germans only have one asset class in which to invest their wealth - equities. It is true that shares, especially ETFs, are globally diversified, which makes them a component of successful investing. However, basing your entire asset strategy on just one asset class is not a good idea. The global equity market is more volatile than alternatives such as private equity. Especially in times of crisis, such as the dotcom bubble or the sharp fall in share prices in 2022, Germans lose their money. We hoard our money like no other. Those who do not invest in shares have parked their money in their bank accounts. This is one of the most devastating ways to "invest" money. Rising inflation reduces the wealth year after year and causes a huge devaluation of savings.
The situation is completely different for wealthy investors worldwide. The so-called high-net-worth individuals (HNWI) invest in all common alternative investments. For example, a whopping 16.8 percent are invested in private equity funds and 16.2 percent in private equity investments. Wealthy investors therefore recognize the great added value and, above all, the stability that other asset classes, such as private equity, offer their portfolios.
A broad spread of your investments is an important factor when it comes to investing your wealth wisely. Diversification helps to minimize your risk and reduce losses while securing the best investment opportunities. Each asset class has its own advantages and disadvantages. An optimal mix of the respective asset classes maximizes the advantages for your wealth, while disadvantages such as volatility are kept as low as possible.
If you invest all your money in just one asset class, you are putting all your eggs in one basket. If this asset class does not perform well, this can lead to considerable losses. By diversifying your portfolio across several asset classes, you minimize the risk of your wealth being affected by fluctuations in a single asset class.
The most important step in determining which asset classes and weightings are best suited to you and your wealth is strategic asset allocation, or SAA for short. A healthy, diversified wealth is based on several stable pillars and is therefore prepared for all eventualities. The SAA is the essential building block for your future-proof wealth . It is the blueprint, foundation and parachute for your wealth at the same time and defines the long-term guard rails and guidelines for your investment portfolio. The SAA takes all your individual needs into account and incorporates them into a customized asset strategy. The capital market is constantly changing. An SAA adapts if new optimal allocations and investment opportunities arise as a result of changes. Of course, only if the adjustments also match your specified guidelines and risk tolerance.
As a wealthy person, you should definitely take your personal risk tolerance into account when designing your portfolio. This is important to ensure that the risk of your wealth is appropriate and that it meets your goals and needs.
How much money do you need to have available at short notice? Should your private funds also be available to your company? How high can short-term losses be? Answering these questions is essential for calculating your individual risk appetite. Finding the right balance between risk and return is one of the most important aspects of successful investing.
The diversification mentioned above also plays an important role in your risk appetite. Equities, as a liquid asset class, are very susceptible to crises, as many investors sell their shares driven by emotion, thereby triggering a snowball effect. However, they also offer high potential returns. This risk can be offset by other asset classes (illiquid) that are more crisis-resistant. These include private equity or real estate, for example, but also gold and liquidity. With an optimal allocation, investors receive a portfolio that stands on several secure pillars and a large or even complete loss of assets seems almost impossible.
Which investment strategy is suitable for you therefore depends heavily on your emotional and economic risk appetite. Liquid investments with low volatility are particularly suitable if other family members are dependent on your wealth or, for example, your private wealth should also be available to your company as a short-term financial resource.
The most important rule when investing is to stick to your strategy and not be influenced by short-term fluctuations. Think long-term and focus on your investment goals and the guidelines of your wealth, which ideally have been determined in advance within your individual asset allocation.
Capital markets can be volatile and it is perfectly normal for the value of investment products to fluctuate over time. Regular monitoring of your portfolio, as is the case with FINVIA, is therefore essential. This ensures that your investment objectives and the associated risk appetite are always taken into account, even when the capital market fluctuates.
Most losses are incurred due to emotional and impulsive decisions. This is precisely where an investment strategy protects you from short-sighted reactions that could have a negative impact on your wealth . You should only react to such fluctuations with the involvement of your SAA and in consultation with your advisor. The motto is: keep a cool head and act rationally.
It's understandable that, as a wealthy person, you don't want to put your money into just any investment products without knowing exactly how they work and whether they meet your objectives. However, with so many investment products available, it's not always easy to find the best ones for your portfolio.
Don't be afraid to draw on the expertise and experience of professional asset managers. Your competent contact person can respond to your individual needs and objectives and carry out a targeted analysis of your portfolio. You will then receive targeted investment recommendations based on your risk profile and investment goals. The ongoing monitoring and adjustment of your portfolio to changing market conditions is also one of the tasks of a professional advisor. Good advice is characterized by the fact that it is product-independent and a solution is developed together with the client that is tailored to their personal situation and individual needs and preferences.
The last few months have shown how important it is to be well prepared for rising interest rates. Rising interest rates can have both negative and positive effects on your wealth - depending on how your portfolio is set up.
The stock market reacts volatilely to rising interest rates. This is because most investors fear that loans will become more expensive for companies and thus slow down investment, which will have a negative impact on growth and sales. However, shares in the financial sector, which is becoming more profitable due to rising interest rates, offer opportunities. Shares in stable sectors such as healthcare and consumer goods now also offer more attractive opportunities.
Bonds also benefit from rising interest rates. Bonds are a way for companies (corporate bonds) and countries (government bonds) to borrow money without having to rely on bank loans. If interest rates rise in general, interest rates also rise for investors who have invested in bonds.
But beware: this is only a positive development for investors who want to invest in bonds. However, the situation is different for investors who are already invested in bonds. The interest rate may not be changed during the term (e.g. 10 years). However, as a higher interest rate is now possible on the same asset class, the prices of existing bonds fall as they have become unattractive for investors.
You can only benefit from rising interest rates if you are well prepared for them. As a wealthy person, this is an issue that you should definitely address.
For a successful wealth it is important that it is carefully managed and that you pursue an investment strategy that matches your investment objectives and risk tolerance. A broad diversification of your investments and the creation of your individual asset allocation are important factors in minimizing your risk of loss and increasing your potential returns. Long-term thinking and the awareness that you should not be influenced by short-term fluctuations are another major advantage. Take advantage of the knowledge of experts and seek professional advice if you are unsure about certain aspects of your wealth or would like valuable support.
FINVIA
23.1.2023
Asad Khan
To help you invest your wealth correctly, we have compiled the top 5 tips from the world's most successful investors. This will help you build a future-proof investment strategy from which your wealth will also benefit in the long term.
You have a considerable wealth and are aware that a careful investment strategy is crucial not only to protect your money, but also to increase it. However, you do not want to blindly invest your wealth in just any investment products. The design of your portfolio is essential in order to minimize your risk and achieve your investment goals.
To help you invest your wealth correctly, we have compiled the top 5 tips from the world's most successful investors. This will help you build a future-proof investment strategy from which your wealth will also benefit in the long term.
From the importance of diversifying your investments to considering your risk appetite and the long-term outlook for your portfolio, these tips will help you grow your wealth safely and successfully.
Together with the Handelsblatt Research Institute 2022, we asked ourselves an important question: "How do Germans manage their wealth?" The resulting study surveyed 300 people aged 18 and over with total assets of at least 500,000 euros who also own or use some form of investment product, for example shares, building society savings contracts, fixed-term deposits, savings accounts or an ETF. The study shows that the majority of wealthy Germans invest mainly in shares and real estate.
Reinhard Panse, Chief Investment Officer of FINVIA Family Office GmbH, attributes this to the lack of knowledge among Germans when it comes to finance. In Germany, the most important basic prerequisite for developing a strategy is less common than in comparable countries: namely appropriate knowledge. Here, hardly any useful financial knowledge is taught in schools. As a result, Germans are apparently unaware of how risky fixed-interest investments in highly indebted countries are in the long term. Germany is the only major industrialized country in which investors have lost almost everything twice in the last hundred years with this form of investment due to the high level of debt caused by the world war."
The conclusion: less wealth also means less experience with investing and therefore less know-how that can be passed on to the next generation. As a result, investments are increasingly being made in asset classes that require a low entry threshold.
According to Reinhard Panse, the financial industry does not help with this knowledge gap either: "The financial industry is not helpful for many investors here, as it is still - at least in part - focused on product sales. The objective development of a long-term investment strategy tailored to the investor's needs is unfortunately a rarity.
You can find the complete study here.
As a result, there is a widespread misconception that most Germans only have one asset class in which to invest their wealth - equities. It is true that shares, especially ETFs, are globally diversified, which makes them a component of successful investing. However, basing your entire asset strategy on just one asset class is not a good idea. The global equity market is more volatile than alternatives such as private equity. Especially in times of crisis, such as the dotcom bubble or the sharp fall in share prices in 2022, Germans lose their money. We hoard our money like no other. Those who do not invest in shares have parked their money in their bank accounts. This is one of the most devastating ways to "invest" money. Rising inflation reduces the wealth year after year and causes a huge devaluation of savings.
The situation is completely different for wealthy investors worldwide. The so-called high-net-worth individuals (HNWI) invest in all common alternative investments. For example, a whopping 16.8 percent are invested in private equity funds and 16.2 percent in private equity investments. Wealthy investors therefore recognize the great added value and, above all, the stability that other asset classes, such as private equity, offer their portfolios.
A broad spread of your investments is an important factor when it comes to investing your wealth wisely. Diversification helps to minimize your risk and reduce losses while securing the best investment opportunities. Each asset class has its own advantages and disadvantages. An optimal mix of the respective asset classes maximizes the advantages for your wealth, while disadvantages such as volatility are kept as low as possible.
If you invest all your money in just one asset class, you are putting all your eggs in one basket. If this asset class does not perform well, this can lead to considerable losses. By diversifying your portfolio across several asset classes, you minimize the risk of your wealth being affected by fluctuations in a single asset class.
The most important step in determining which asset classes and weightings are best suited to you and your wealth is strategic asset allocation, or SAA for short. A healthy, diversified wealth is based on several stable pillars and is therefore prepared for all eventualities. The SAA is the essential building block for your future-proof wealth . It is the blueprint, foundation and parachute for your wealth at the same time and defines the long-term guard rails and guidelines for your investment portfolio. The SAA takes all your individual needs into account and incorporates them into a customized asset strategy. The capital market is constantly changing. An SAA adapts if new optimal allocations and investment opportunities arise as a result of changes. Of course, only if the adjustments also match your specified guidelines and risk tolerance.
As a wealthy person, you should definitely take your personal risk tolerance into account when designing your portfolio. This is important to ensure that the risk of your wealth is appropriate and that it meets your goals and needs.
How much money do you need to have available at short notice? Should your private funds also be available to your company? How high can short-term losses be? Answering these questions is essential for calculating your individual risk appetite. Finding the right balance between risk and return is one of the most important aspects of successful investing.
The diversification mentioned above also plays an important role in your risk appetite. Equities, as a liquid asset class, are very susceptible to crises, as many investors sell their shares driven by emotion, thereby triggering a snowball effect. However, they also offer high potential returns. This risk can be offset by other asset classes (illiquid) that are more crisis-resistant. These include private equity or real estate, for example, but also gold and liquidity. With an optimal allocation, investors receive a portfolio that stands on several secure pillars and a large or even complete loss of assets seems almost impossible.
Which investment strategy is suitable for you therefore depends heavily on your emotional and economic risk appetite. Liquid investments with low volatility are particularly suitable if other family members are dependent on your wealth or, for example, your private wealth should also be available to your company as a short-term financial resource.
The most important rule when investing is to stick to your strategy and not be influenced by short-term fluctuations. Think long-term and focus on your investment goals and the guidelines of your wealth, which ideally have been determined in advance within your individual asset allocation.
Capital markets can be volatile and it is perfectly normal for the value of investment products to fluctuate over time. Regular monitoring of your portfolio, as is the case with FINVIA, is therefore essential. This ensures that your investment objectives and the associated risk appetite are always taken into account, even when the capital market fluctuates.
Most losses are incurred due to emotional and impulsive decisions. This is precisely where an investment strategy protects you from short-sighted reactions that could have a negative impact on your wealth . You should only react to such fluctuations with the involvement of your SAA and in consultation with your advisor. The motto is: keep a cool head and act rationally.
It's understandable that, as a wealthy person, you don't want to put your money into just any investment products without knowing exactly how they work and whether they meet your objectives. However, with so many investment products available, it's not always easy to find the best ones for your portfolio.
Don't be afraid to draw on the expertise and experience of professional asset managers. Your competent contact person can respond to your individual needs and objectives and carry out a targeted analysis of your portfolio. You will then receive targeted investment recommendations based on your risk profile and investment goals. The ongoing monitoring and adjustment of your portfolio to changing market conditions is also one of the tasks of a professional advisor. Good advice is characterized by the fact that it is product-independent and a solution is developed together with the client that is tailored to their personal situation and individual needs and preferences.
The last few months have shown how important it is to be well prepared for rising interest rates. Rising interest rates can have both negative and positive effects on your wealth - depending on how your portfolio is set up.
The stock market reacts volatilely to rising interest rates. This is because most investors fear that loans will become more expensive for companies and thus slow down investment, which will have a negative impact on growth and sales. However, shares in the financial sector, which is becoming more profitable due to rising interest rates, offer opportunities. Shares in stable sectors such as healthcare and consumer goods now also offer more attractive opportunities.
Bonds also benefit from rising interest rates. Bonds are a way for companies (corporate bonds) and countries (government bonds) to borrow money without having to rely on bank loans. If interest rates rise in general, interest rates also rise for investors who have invested in bonds.
But beware: this is only a positive development for investors who want to invest in bonds. However, the situation is different for investors who are already invested in bonds. The interest rate may not be changed during the term (e.g. 10 years). However, as a higher interest rate is now possible on the same asset class, the prices of existing bonds fall as they have become unattractive for investors.
You can only benefit from rising interest rates if you are well prepared for them. As a wealthy person, this is an issue that you should definitely address.
For a successful wealth it is important that it is carefully managed and that you pursue an investment strategy that matches your investment objectives and risk tolerance. A broad diversification of your investments and the creation of your individual asset allocation are important factors in minimizing your risk of loss and increasing your potential returns. Long-term thinking and the awareness that you should not be influenced by short-term fluctuations are another major advantage. Take advantage of the knowledge of experts and seek professional advice if you are unsure about certain aspects of your wealth or would like valuable support.
About the author
Asad Khan
Asad Khan is Managing Director of FINVIA Capital GmbH and, as Head of Capital Markets in the CIO Office, is responsible for liquid asset classes and the wealth management division. As a member of the Investment Committee, he is also responsible for the strategic direction of the investment policy.
After studying business administration at the University of Mannheim, specializing in finance and auditing, he began his career at UBS. There he managed individual family office mandates in the Ultra High Net Worth Individuals (UHNWI) segment and advised professional investors. He then moved to Bank Julius Baer in 2010, where he set up and was responsible for individual investment strategies as Head of Special Mandates. He also managed Julius Baer's European advisory business between 2013 and 2016. During this time, he and his team supported the Europe-wide integration of the Merrill Lynch units and built up important European client relationships for the bank.
