By Henrike Hein, Jan. 15, 2023
Is now a good time to invest (in stocks)?
Ukraine war, climate change, inflation, rising interest rates and disrupted supply chains, times are uncertain and so are the financial markets.
Is it smart to invest in times like these? Our answer is: Yes!
And the reasons are as follows:
- Rising inflation: Rising energy costs are also pushing up the prices of all other products and services. Money that is only lying dormant in an account or in low-interest investment products is thus becoming worth less and less.
- Rising interest rates: Interest rates have been rising again for a long time, which supposedly makes interest-bearing accounts more attractive again. However, these interest rates cannot compensate for the current loss of value due to high inflation. Yields on the stock market remain more attractive. On the other hand, high interest rates make the stock market more unsettled, as it becomes more expensive for companies to borrow. It is therefore worth investing in high-quality companies with a sustainable or future-proof business model.
- EU-Taxonomy: Due to the current political situation, the EU Parliament has decided within the framework of the EU taxonomy to classify nuclear power and natural gas as sustainable under certain conditions. The aim of the taxonomy is actually to steer investments into sustainable business models and technologies. In this way, the goals of the Paris Agreement are to be achieved more quickly. However, this classification means that investors could invest in supposedly green funds in forms of energy that are not sustainable and have no future. are not sustainable and have no future.
- Low rates: Low prices scare many, as they are associated with losses, but for newcomers this means low prices. No one can say when the perfect time to invest will be and whether prices will not fall even further. However, the past has shown that every crisis eventually ends and markets recover. This could also be observed in the Corona crisis Shares of well-managed companies were much better off in December 2022 than in March 2020 after the Corona stock market crash. The global MSCI World stock index is up 52 percent over five years and as much as 192 percent over ten years (as of Dec. 22, 2022). It is therefore important to have a long-term investment horizon and the sustainability of investments in order to survive crises.
To counteract the loss in value of one's own assets due to inflation, investments make sense and are currently favorable. Since stock investments are transparent, but also involve certain risks, we have developed an algorithm that compiles stock portfolios based on ambitious sustainability criteria and then optimizes them for risk-return. This means that even beginners can invest in equities and benefit from the benefit from the automated implementation of the investment strategy.