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Navigating uncertainty in the stock market
“The future is traded on the stock exchange,” is a famous saying, and especially during times of war in Europe, the future seems even more uncertain. Since the beginning of the year, the German DAX stock index has lost more than 20% of its value (as of March 7, 2022). Rapidly rising energy prices, geopolitical uncertainties, and declining demand fuel fears of an economic slump in Germany and throughout the world. To survive such times on the stock market, it is essential to be aware of a few simple rules.
Diversification pays off
You may have heard the phrase, “Broadly diversified, never regretted.” Suppose you diversify your portfolio, meaning you invest broadly and don’t just selectively invest your money in a few companies. In that case, you spread your risk and make your portfolio less vulnerable to crises and individual company news. After all, while some industries and regions may be hit very hard by a crisis, others are not.
If you invest money continuously, you buy more shares when stock prices fall. This is also known as the cost average effect and means that in a savings plan with the same monthly deposit amount, more shares can be purchased when prices on the stock market are falling than when prices are rising. Over a more extended period, investors can achieve a more favourable average price.
Keeping emotions in check
Please do not panic. Looking at your portfolio may hurt in the short term, but there is hardly a more profitable way to invest your money in the long run. On average, a broadly diversified stock portfolio yields around 8% per year. It is also worth looking at the yield triangle of the Deutsches Aktieninstitut. If, for example, you invested in the DAX at the beginning of 2000 and sold your shares in 2021, you would have achieved an average annual return of 4.4%, even though the dot-com bubble burst in 2000 and a financial crisis took place in 2007/2008. Despite two major economic crises in the period, there is a positive return.
We at UnitPlus …
… believe in simple and flexible investment that actively takes these rules into account. The four UnitPlus portfolios invest worldwide in over 800 companies with recognized sustainability criteria. At the same time, our personalised savings plan allows every user to invest amounts tailored to their needs monthly. Also, the app itself is clearly laid out and intuitive, so you can feel comfortable using it. We are now looking forward to going to market in April 2022 after more than a year of development work.