Invest

A lot of words have been written about how to invest properly. And rightly so. Investing is in fact much more demanding than you might think. Many people think they are investing, but they are only speculating. I don’t want to go into my investment philosophy – which of course runs through Dr. Polleit’s BOOM & BUST REPORT – in full at this point. A few considerations may suffice to outline its essence:

• Most investors are not in a position to outperform the market as a whole on a sustained basis, i.e. they cannot “outperform”.
• Only a few investors have mastered “market timing”. Most of them end up “underperforming” with this strategy.
• The successful investor does not act rashly, impatiently, does not follow the “herd instinct”.
  Pricing on the capital markets is driven by expectations: It is not the here and now, the current situation that counts, but expectations for the future.
• Only invest if the price (that you pay for a share, bond or troy ounce of gold, for example) is lower than its value.
• This gives you a “safety margin” that boosts your returns and reduces the risk of suffering unacceptable losses.
• What is the value? Value is what the investor has to find out. This is often not an easy task, but it is the key to investment success.
• The risk borne by the investor is not the short-term ups and downs on the stock markets (the “volatility”). Rather, it is a permanent loss of capital.
• It is important to avoid permanent capital losses in any case, but not necessarily to shy away from high volatility.
• Don’t be fooled by the “Modern
• Financial Market Theory” (especially “Modern Portfolio Theory”), it misleads investors.

Anyone who invests cannot avoid looking at the “big picture” – such as geopolitical shifts, the monetary policy of central banks, market interventions by governments and more. When it comes to the significance of such factors, I categorize them as follows:

• Not all of the news that comes to investors is relevant to them. On the whole, they are usually even irrelevant for them.
• The media and financial market journalists are usually very good at distracting investors’ attention from the really important things.
• The investor’s main focus must always be on determining value – whether investing in shares, bonds, precious metals or real estate.
• If you know the value of your investment (at least approximately), you can literally sleep better, especially when things get turbulent on the markets.
• The future is full of surprises. Investors should therefore not overestimate themselves and ensure a certain degree of diversification.

Much of the world is in a state of upheaval, and past experience can be used less than ever as a guide for the future. As a “working hypothesis” for the investor, as a basic orientation, I always have the following in mind:

• Achieving a positive real (i.e. inflation-adjusted) return on capital employed will undoubtedly become increasingly difficult in the time ahead.
• The international fiat money system is extremely crisis-prone. But you should be careful not to bet prematurely on a collapse with your investments.
• This is because governments and their central banks are intervening more and more in the economic and financial system, shutting down the corrective market forces.
• Although a “big crash” cannot be ruled out, its probability of occurrence is significantly reduced under these conditions.
• It is to be feared that states and their central banks will continue to reduce the purchasing power of official currencies through a large-scale inflation policy.
• Investing in productive capital (in the simplest case, company shares) is one way of defying the trials and tribulations that lie ahead.
• Gold is the “basic money of mankind”, it is the ultimate means of payment. I assume that this characteristic of gold will remain intact in the coming years.