Invest money when the gross domestic product falls
The BDI (Federation of German Industries eV) writes in its global growth outlook 04/2020:
“A severe recession in the United States, Europe and Japan can no longer be avoided this year. Global economic output will drop by up to three percent. It only fell once in the past 50 years - by 1.7 percent in 2009. "
“For Germany, a decline in gross domestic product of three to six percent must be expected in the current year. The prerequisite is an interruption of economic activity of a maximum of six weeks. "
The recession is coming - how can I invest my money now?
After the crash of the stock markets, investors are wondering what happens next and how to invest their money now. Are the stock markets falling any further or are we already on an upswing? The ups and downs on the stock market will continue for a few more weeks if not months. The economic consequences cannot be foreseen at the moment.
Many wonder what to do with your money in this time of crisis.
What investors should do now.
1) Don't spend money unnecessarily
Keep your money together and do not plan unnecessary expenses.
2) Cash: 2 - 3 monthly salaries
If you can afford it, you should have 2 - 3 months' salary in cash at home in order to be prepared for unforeseen liquidity shortages. During the Greek crisis, citizens were only allowed to withdraw a maximum of 60 euros a day from the bank. Even if you have a lot of money in the bank, you may not get your money.
3) Check deposit insurance at the bank
The statutory deposit protection in the European Union (EU) is 100,000 euros per investor and bank. Some banks operating in Germany even guarantee higher amounts through additional security systems.
The deposit protection covers funds in the current account, call money account, savings book and time deposit account. Shares and investment funds count as special assets and are not affected by the bankruptcy of a bank. ETFs are basically also considered special funds. There are exceptions to this: Risks with ETFs - where traps lurk despite investment funds.
Stiftung Warentest recommends the following banks: This is how deposit insurance works for investors in Germany.
For more information, see einlagensicherung.de.
4) Distribute money to several banks (if more than 100.00 euros)
If you have assets of more than 100,000 euros, it is advisable to divide the assets among several banks. The selection of the bank is also important here in order to be protected in the event of a bank failure.
5) 5 - 10% invest in gold
Gold is considered the currency in crisis. At the beginning of the Corona crisis, the gold price rose. At the end of February, however, the gold price came under pressure. One reason could be that many investors have converted their gold into cash in order to be liquid in a possible crisis. In the meantime, the gold price has risen again. In the long run, a gold deposit of 5 - 10% makes sense.
6) Start investing in stocks
The stock markets lost as much as 40%. At the moment it appears that the markets are stabilizing again. Appearances could be deceptive. It is possible that the markets will fall sharply again. In the next few weeks, developments in the USA should be of great importance.
Is this still a good time to join? It depends on the investment horizon. If you don't urgently need your money for the next few years, you can already find interesting introductory courses.
If you don't want to invest in individual stocks, you should invest in ETFs (Exchange Traded Funds). ETFs track a well-known index. So that we spread the risk. The costs for ETFs are significantly lower than for investment funds. More on this in our article: Why stocks?.
In the following article by focus.de, stock market professional Gottfried Urban explains why the time has come for value stocks: After the stock market quake: Now vaccinate the depot with value stocks.
Value stocks are stocks for which traditional key figures such as equity ratio, return on equity and earnings ratio are rated positively.
How do you find good value stocks?
One possible tool is www.TransparentShare.com. TransparentShare automatically rates stocks with 12 data-based key figures and recommends them for buying or selling.
Nobody knows when the recovery will start. However, the past has shown that that day will come. In this respect, keep calm! The prices will go up again in the long term.
"Every crisis has not only its dangers but also its possibilities.”
Martin Luther King
We wish you a happy and relaxing Easter.
Your TransparentShare team
Other interesting articles on the topic:
- BDI: Global Growth Outlook 04/2020
- Is the deposit protection still in effect and what happens in the event of a bank failure? (focus.de)
- This is how the markets are developing - what needs to be done now (test.de)
- The stock market crash as a buying opportunity - who should buy shares now (Manager Magazin)
- Corona - legal issues and funding. There is advice and financial help here (test.de)
- How you can now get more out of your money! (bild.de)