109 record highs and a record month: Staying invested is top priority
Luxembourg, 13 May 2020 – April 2020 will go down in history as one of the best stock market months – despite the pandemic, job losses and low oil prices. After the lockdown collapse, the markets have recovered impressively quickly. “This goes to show that the best stock market days are often very close to the worst ones”, said Sascha Werner, Portfolio Manager at Moventum AM. “And the biggest mistake is not to be invested at all.”
Long-term investment in equities is paying off, setbacks have frequently turned out to be buying opportunities in the past. The Dax, for instance, has climbed to a new historic record high no less than 109 times since the 2008 financial crisis. After the pandemic shock, it has also recovered well. Many investors, however, are influenced by flashy presentations of index positions, often leading to a situation where no investment is made at all. “Once the Dax reaches a record high, there is often a feeling that shares are too expensive”, Werner added. “When the Dax falls, it is the negative sentiment that keeps people from buying shares.” As a consequence, unadvised private investors are therefore invested well below average – a poor choice in times of low interest rates.
Especially in light of the fact that any such record levels are always just a snapshot: “Since the financial crisis, there have been 109 record highs”, Werner pointed out. “What this also means, though, is that a full 108 of them are now history and investors could have enjoyed even higher stock prices in the subsequent periods.” Even if investors had started investing at the worst possible time at the 2011 stock market high, by the end of April, after the Dax had fallen in the wake of the coronavirus in the meantime, they would have realised a total return of 44 percent or about four percent annualised.
“The long series of records only shows that stock markets have risen very steadily in the past”, said Werner. “Many investors will shy away from buying at record highs, thinking that prices are too high.” Although this reasoning is understandable at the time, it becomes old news as soon as the next record high follows. “The historic high from the beginning of May 2013, when the Dax first cracked 8,000 points, can only be seen as a milestone marker today”, Werner added.
Even those who started investing in May 2013 experienced growth of 24 percent or 3.5 percent annualised. “Consequently, investors should not be deterred by negative sentiment or reports of new records”, said Werner. “In the past, these were always just stepping stones on the road to even greater heights.” There are years, however, in which the index did not fare as well: in all of 2016, for example, the Dax did not reach a new high.
“This shows that in terms of long-term investment success it is not important how many highs or lows there were in a particular year or whether the performance was record-breaking”, Werner explained. The most reasonable concept is to invest permanently and regularly. “It is crucial to have a sensible strategy that is able to withstand ups and downs, so as not to be driven crazy by short-term fluctuations in the markets – whatever direction they may take”, said Werner.
Moventum Asset Management S.A. (Moventum AM) is a wholly-owned subsidiary of Moventum S.C.A. The management company, in which Moventum’s asset management expertise has been concentrated since the beginning of 2019, manages Moventum’s own funds and individual mandates as part of its asset management portfolios.
As an independent financial service partner, Moventum S.C.A. is specifically addressing financial service providers such as financial advisors, asset managers, institutional investors and NGOs. Its services in asset management and asset building include a web-based securities investment platform focusing on funds, relieving financial advisors of administrative tasks, and integrating custody and account management for individual investors. Investment management tools, regulatory-compliant reporting and individual securities services are also part of the full-service range. Standardised fund asset management service with a sustainable, successful track record for the relevant risk/reward profiles complements the offering. The Moventum Group also enables institutional investors to outsource securities processing in its entirety. The MoventumOffice investment platform offers access to more than 9,000 investment products including funds and ETFs from more than 400 investment firms, including the use of analysis, reporting and support tools.
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