Which is the right investment
Investors need strong nerves. The stock markets collapsed at the beginning of the Corona crisis and then rose to record highs in March 2021. We will show you how you can currently invest money and which strategy is the right one for which type - even and especially in times of crisis like this.
How should I invest my money in 2021?
The year 2021 is a particularly difficult one for anyone who wants to invest money profitably. The development of the stock markets is difficult to predict due to the corona crisis. Many prices have recovered since the stock market crash in spring 2020. What happens next depends on the success of the vaccination campaigns and a possible recovery in the economy. The trends in the real estate market can also only be predicted with uncertainty. Many questions remain: Will prices continue to rise because investors see it as the only way to invest their money properly? Or are prices falling because many people are unemployed as a result of the Corona crisis, they can no longer pay the installments on their loan and as a result have to sell their property? So many investors wonder how best to invest their money. There are still various investment options for this.
The corona virus has brought the financial markets into a tailspin and unsettled many private investors. Are you wondering what the crisis means for your finances? Then we recommend our finances guide in times of crisis.
What options do I have for investing money?
Below you will find tips on how to invest your money up-to-date. By the way: If you are interested in securities such as stocks or would like to invest in ETFs or funds, you need a custody account to trade. If you don't have one yet, we recommend cheap offers in our depot comparison.Depot comparison
Investing money in stocks
Anyone who invests money in individual stocks must be aware that their investment is always a bet on the rising price of this stock. That can go well: Shareholders repeatedly generate very respectable profits with shares, especially after a share price fall such as the Corona crisis. But it can also go wrong - and the value of the share can plummet within a short period of time. If things go really bad, he won't recover and the money is gone. The return expectations fluctuate extremely here. In principle, therefore, the following applies: You should only invest in individual stocks if you can do without the money invested there.
Read our buying guide to find out what to look for when investing in stocks and which stocks are suitable for beginners.
Invest money in funds
Funds refer to actively managed equity funds. You usually buy shares in it through your house bank. Actively managed funds are looked after by a fund manager, i.e. a bank employee, who actively monitors the market and buys and sells shares. The fund develops positively or negatively depending on whether the fund manager has a good hand or not.
Anyone who opts for an actively managed fund should definitely pay attention to the level of management costs. Depending on the fund, they can fluctuate a lot. And the higher the costs, the narrower the return for the investor in the end.
Read more about this on our equity fund page.
Investing money in ETFs
Anyone who invests money in ETFs has two advantages over funds: On the one hand, the management costs are significantly lower, which means that more of the increase in value remains for the investor. On the other hand, they usually do better in terms of performance. Because ETFs replicate an index - for example the DAX. If the value of the DAX rises, so does the value of the index. If the DAX falls, the value of the index also falls automatically. Active fund managers try to outperform ETFs by actively buying and selling. However, they rarely succeed in doing this. It is also said that fund managers rarely “beat” the market.
If you want to invest your money in a broadly diversified ETF, experts repeatedly recommend the MSCI World. Its return has been an average of 7.1% per year since 1970 - despite various crises - and is therefore a profitable investment for many.
You can get an overview of providers of ETFs on our ETF comparison page.
Investing money in real estate
Many experts regard real estate as a relatively safe way to invest money. After all, people always need an apartment. How attractive real estate is as an investment option depends to a large extent on the purchase price, because its relationship to rental income ultimately determines the return.
However, it is currently difficult to predict how real estate prices will develop: some experts believe that they will continue to rise because building interest rates will remain low for years to come or even fall further.
Other experts believe that house prices could now also fall. This could be the case in particular if more and more property owners have to sell their properties because they can no longer service their property loans due to a job loss or short-time work. But even in such a case, prices will not fall equally everywhere: In metropolitan regions such as Munich or Hamburg, experts expect at most a small drop, if at all.
Find out tips and background information in our guide to real estate as an investment.
Invest money in time deposits
Fixed-term deposits have offered rather low interest rates in recent years. Interest rates are currently rising again at many banks. The reason: The banks are increasingly relying on the deposits of savers, because it is currently cheaper for them to finance themselves with customer bonds than with corporate bonds. However, you do not get a return on a fixed-term deposit account that a broadly diversified ETF generates. But if you are wondering: How can I securely invest my money? You are definitely right with a fixed-term deposit account. A clear advantage in contrast to shares, for example, is that in the end you will definitely get back the amount you paid in. Minus the possible loss of value due to inflation, of course.
If you want to invest large sums of money, you should observe the Deposit Protection Act: up to € 100,000 is covered per bank and customer within the European Union. Many German banks hedge significantly higher sums - but these are then not enforceable. So if you want to invest more than € 100,000, it is better to split the sum over several banks.
We show you current interest on fixed deposits in our fixed deposit comparison.
Invest money in overnight money
The same applies to overnight money as an investment option: interest rates have been in the basement for a long time and are currently rising slightly, even if they also do not come close to the returns of widely diversified ETFs. Even with overnight money accounts, investors get back the amount they have deposited. One advantage over fixed-term deposits: You could have access to money in call money accounts at any time. The Deposit Protection Act also applies here. Many people, who are wondering how to invest their money correctly, park at least their nest egg - often in the form of at least three net salaries - in an overnight money account.
You can see offers for overnight money in our daily money comparison.
Investing money in gold
In times of crisis there is often a run for gold. For many investors, the precious metal appears to be a safe haven. The ulterior motive: in the worst case, gold can still be used as a medium of exchange for goods. In contrast to stocks or fixed-term deposits, you ultimately have real value in your hand in the form of a gold bar or coin.
However, the price of gold fluctuates strongly and is - similar to individual stocks - a speculative investment. The strong fluctuations are mainly due to the fact that the price of gold depends on demand, while the value of stocks can also be traced back to the development of a company. There is no such development with gold. Experts therefore advise investing a maximum of 10% of your total assets in gold. Since gold often moves in the opposite direction to share prices, it can cushion fluctuations in securities accounts.
In the long run, however, gold does not generate half as much return as an investment in a globally diversified stock index. In addition, the money that you invest in gold does not bring any interest. And gold doesn't generate a dividend either. Learn more about the topic in our article Buy gold.
Invest money through equity crowdfunding
Crowdinvesting means that many people invest money in company projects and thereby become shareholders in the respective company. This form of investment is particularly popular in the real estate sector and promises high returns. Crowdinvestors usually receive a fixed or variable interest rate for their participation. Some also hope that a major investor will later buy the still young company and that they can sell their shares to them for an attractive price.
The most important rule is: Only invest your money in crowd investing if you understand the project in question. Clarify any questions that arise. If this cannot be resolved seriously, it is better to keep your hands off it. Also, take a close look at the forecasts for future sales and profits and consider whether they are plausible. Because if you want to invest your money via crowd investing, you should be aware that the entire amount can be gone in the event of bankruptcy.
If you are interested in investing in real estate with crowdinvesting, we recommend our crowdinvesting comparison.
Investing money in real assets
Especially in times of low interest rates, some investors want to invest part of their money in real assets, for example to protect themselves against inflation. In this case, tangible assets are goods that are supposedly not subject to any fluctuations in value. However, this is by no means always the case.
Because in principle all goods that have a certain value count as material value, there are almost endless possibilities. Material assets include, for example, musical instruments, antiques, jewelry, art, but also vintage cars, valuable whiskeys or wines. In short: everything for which you - presumably - find a buyer who is willing to pay a certain price regardless of inflation. In order to invest money in real assets, investors need good expertise in the respective area. Luck is also part of it. Because whether a whiskey, which is now assumed to increase in value over the next few years, will actually be worth more in the end, can only be said in retrospect. Investing in real assets is therefore considered to be highly speculative.
Investing money in emerging markets
If you want to invest your money long-term, it can make perfect sense to invest in an ETF, for example, made up of shares in companies from emerging markets. Compared to ETFs that contain shares in companies from developed countries, emerging market ETFs tend to fluctuate more and more frequently. In good phases they often increase more sharply. On the other hand, they often drop more sharply in bad phases.
In the past, it has also been the case that emerging market indices performed well during times when developed market indices were underperforming. In the case of the current corona pandemic, which affects the whole world, this can hardly be predicted. But it could happen that, for example, the prices on the stock exchanges in China rise. Since China is one of the emerging markets, this could have a positive impact on some emerging market indices.
Investing money for children
If you want to invest money for your children, grandchildren, nieces or nephews, you should start early. Because even if you only invest little money on a regular basis, you can also generate a return over a longer period of time, depending on the type of investment. Basically, experts recommend anyone who wants to invest money for children, either ETFs, day or time deposit accounts or a current account. Which one you choose depends on your savings goal and your investment horizon. You can find lots of tips and more detailed information in our article Saving for Children.
How do I find out which investment strategy suits me?
What is the best investment at the moment always depends on the goal you are pursuing with it.
Do you want to generate short-term profits?
Serious tips can hardly be given for money that you invest in the short term. After all, in times like these, they can only be achieved with stocks. And anyone who invests in individual stocks is always speculating. In the stupidest case, the stock is suddenly only worth half as much and much of the money you have invested is gone.
Anyone who is still interested in it can at least proceed systematically to the extent that he is now considering which sectors could possibly benefit from the crisis and which not. For shares in companies that manufacture disinfectants or protective equipment such as masks, for example, there is a comparatively good chance that they will continue to develop positively in the coming months. The same applies, for example, to pharmaceutical companies that manufacture vaccines against the corona virus.
But: You can only know for sure in retrospect. Everyone has to decide for themselves whether it makes sense to invest in shares in companies whose prices are currently in the basement: Some people think the timing is just right because they are convinced that the share price will rise again. If you have bought at a good time, this increase is then particularly large in the best case. However, since the reverse development is also conceivable, the following always applies to individual stocks: Only invest money here that you could do without. Because there is no guarantee that you will generate a good return if you invest your money in this way.
Already knew? If you want to make sure that the value of your own portfolio never falls below a certain amount, you can use so-called stop rates. This allows you to set a certain percentage limit up to which you can tolerate a loss on a share. If the lower limit is reached, the bank sells the relevant shares. However, it will then be put up for sale without a limit. This means that it can also be sold well below this value if the price suddenly falls. Stop courses are therefore not an absolutely watertight option.
Do you want to invest money over the long term?
If you want to invest your money long-term - i.e. at least 10 to 15 years - and broadly diversified, ETFs (Exchange Traded Funds) are best suited for this. They replicate an index that contains the shares of many companies. Probably the most famous of all ETFs - the MSCI World - contains shares in more than 1,600 companies from 23 industrialized countries. The index is also so popular because investors use it to invest their money relatively safely. The MSCI World contains shares from companies from very different areas of the economy: from information technology, from the financial sector, from the health sector, but also from industrial goods companies.
With a long-term investment, a savings plan on an ETF is particularly worthwhile. That means: You invest money every month or once a quarter and use it to buy shares for your savings plan. In such a case, the current crisis can even be an advantage for you. Because now that the prices are in the basement, you get more shares for your money than in times of high stock exchange prices. If you can now buy a comparatively large number of shares for little money, you will benefit even more the next time the stock market is up.
Do you want to invest money without risk?
Investing money without risk is possible - but it is not particularly profitable. Day and time deposit accounts are a risk-free investment. Interest rates have risen recently, but most of the time they are still below the 2% inflation rate. In other words: you will not generate a return with it. However, overnight and fixed-term deposits are a good way of protecting part of your investment.
What should you pay particular attention to when investing money in times of crisis?
Which investment option is the best depends a lot on what type of person you are: If you have no problem with temporary price losses, this is certainly a good time to get into the stock market with ETFs. Whether you will catch the very best time for it - i.e. the one when the prices are currently at the very lowest level - you can always only know in retrospect.
For those who are wondering how to invest their money in such a way that they can hedge it against losses in a crisis, day and time deposit accounts are more suitable. Whether in a crisis or not, in general you should always heed some basic tips when investing, as we explain to you on our investment tips page.
How should I manage my investment strategy over the long term?
For those who are already active on the stock market, one thing applies above all else in times of crisis: do not look too often into your portfolio, because you will probably see mostly red numbers there. However, if you have invested money in broadly diversified index funds, you usually don't have to worry.So far, they have recovered after every crisis and even always experienced an upswing that was above the previous high.
Investors should not suspend savings plans either, but rather be pleased that they are now getting more shares for their money than during a stock market boom.
In no case should you currently sell shares in savings plans if this is not absolutely necessary. Because then the losses do not just exist on paper, but are realized - and part of the money is gone in any case.
If you want to invest your money profitably, but also securely, you should use several investment options: Experts recommend investing at least three net salaries in a daily or fixed-term deposit account. In addition, depending on your financial situation and your own willingness to take risks, investing in ETFs or real estate, for example, can be worthwhile.
ETFs promise high returns, but there is a large selection of index funds. Our ETF comparison shows you which ETFs are worth investing in! Our tips on how to best proceed.ETF comparison
You have decided to invest in ETFs. The MSCI World Index has a number of advantages, but you should decide wisely and compare the best offers.MSCI World ETF
Crowdfunding is crowdfunding in which private investors invest small amounts in a project or company. We'll give you tips on how you can earn money doing this.Crowdfunding
Safe and profitable asset accumulation can be easily implemented with an ETF savings plan. Especially those who want to save with small sums are well advised to do so!ETF savings plan
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