Have you already spent a lot of time trying to get a product such as a vacuum cleaner as cheaply as possible? If you are successful, you might save 50 francs through thorough research and be happy about it. Do you also make the same effort when investing money? And aren’t the amounts involved much higher? Here we give you an overview of the questions you should ask yourself when investing.
Goal Definition
If you have clearly defined your goals, you have already done a lot of work. Next, you need to ask yourself what role you want to play in your investments. Do you want to decide in which markets you invest, how much and with which investment instruments? Or are you prepared to delegate the decisions? Various studies show that investors systematically overestimate themselves. They also judge the results of their own decisions too positively, i.e. profits are attributed to their own abilities, while losses are often simply ignored. The vast majority of investors would probably be better off if wealth management were delegated.
Delegating wealth management decisions is not only possible for private banking clients. Small investors can also benefit from well-diversified, actively managed wealth management via so-called portfolio or mixed funds.
When it comes to investing money, literature and relevant guides usually talk about the “magic triangle” of investment: security, return and availability. You want all three? Sure, but this is precisely where the problem lies, because the objectives of the “magic triangle” involve conflicts. You have to make a decision: How important are high security, high returns or quick availability for you?
Goals can only be defined in line with an honest assessment of your personal situation. How well will you sleep if you have lost 10%/20%/30% of your assets due to price falls? When will you need the funds again? For what? Answering these questions will lead you to your individual risk appetite (How much risk do I want to take?) and risk capacity (How much risk can I take?).
And it doesn’t stop there. There are other goals you can aim for with your investment. Do you want to do good? Would you like to invest your money as sustainably as possible? Do you want to promote or explicitly exclude certain areas of the economy?
Define Your Own Goals
If you have clearly defined your goals, you have already done a lot of work. Next, you need to ask yourself what role you want to play in your investments. Do you want to decide in which markets you invest, how much and with which investment instruments? Or are you prepared to delegate the decisions? Various studies show that investors systematically overestimate themselves. They also judge the results of their own decisions too positively, i.e. profits are attributed to their own abilities, while losses are often simply ignored. The vast majority of investors would probably be better off if wealth management were delegated.
Delegating wealth management decisions is not only possible for private banking clients. Small investors can also benefit from well-diversified, actively managed wealth management via so-called portfolio or mixed funds.
Define Your Investment Strategy
Once you have defined your goals, including your risk appetite and investment horizon, and are clear about your own role, you can define your investment strategy. Should your money be invested actively and opportunity-orientated or do you prefer a cost-effective passive investment strategy? Should your funds be invested primarily in Switzerland without currency risk or should they be globally diversified? Do you want to overweight or underweight certain markets? Do you want to invest money in bonds at all in times of negative interest rates? Are you interested in hedge funds, precious metals or private equity? Even if you delegate the investment decisions, you should give these questions some thought in order to be able to set a rough direction.
Select Provider
Where do you get good investment recommendations? Who has achieved good performance in the past? At what level of investable assets are you welcome at which providers? Which providers pay their advisors high bonuses if they sell expensive or proprietary products? How high are wealth management, custody and transaction fees? There are 260 banks and between 2,000 and 3,000 independent asset managers in Switzerland. Which of them meet your needs and expectations?
Conclusion
The number and complexity of questions to be answered in relation to investments is high. If you have a great deal of sound financial knowledge, you can work through these questions on your own and arrive at good solutions. A realistic self-assessment is essential. The vast majority of investors should use a bank or wealth manager for this: A good, reputable provider will guide you through the process and help you answer the questions correctly and objectively. Investors with available assets of at least CHF 500,000 can access FinGuide free of charge to select a provider. Investors who do not (yet) have these assets can use comparison platforms to get an initial picture of the providers. You can find more information about free advice from FinGuide on our homepage.
