1. Is Buy and Hold dead?
The last 12 years have been unique on the capital market. Investors who invested in equities in a diversified manner since 2009 were generally able to achieve significant double-digit returns p.a. in their investment portfolio. A redeploy was not necessary. For the year as a year, investors did not have to complain about a loss. Even the corona crisis year 2020 brought a significant plus in the end.
This is a very unusual market phase and was due to the significantly falling interest rates and the strong growth in the money supply with low inflation at the same time. This Goldilocks scenario is now coming to an end and the next decade will be much more difficult for buy and hold investments.
Investors appreciate buy and hold that they don’t have to care much. A one-time investment or a savings plan can be used to build up your own securities account. However, this convenience is usually accompanied by a lower return and a significant increase in portfolio fluctuations. If you use active investment strategies, you can usually beat a buy and hold investment significantly with little work and time. That means getting more return or getting less risk. In the best case, of course, both
2. Why will the next 10 years on the stock market be different than before?
The key difference is inflation. The past decade has been marked by global consumer price inflation, which has historically been well below the long-term average. The significant increase in the money supply led to rising real estate prices and higher share prices (asset price inflation). Consumers have been spared for the time being because the speed of money circulation has fallen and the global economy has been able to benefit from increasing globalization and digital innovations. Unit labour costs were also very low after adjusting for inflation. This is all changing at the moment and there are still sharply rising commodity prices and a more difficult demographic situation. The corona crisis was the catalyst here.
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