November 1, 2018

The next crash is coming - and I don’t care

One thing is certain: The next stock market crash is coming. The question is, what can we do about it? Hedging against a crash doesn’t make a lot of sense, because nobody can predict when it will occur; and because hedging is expensive. If you use hedging on a regular basis, you can easily burn through half of your savings.

We can see this in the Swiss pension funds: They are required by law to hedge against crashes. That’s the reason they are only able to pay out 1-2% in returns to the insured clients, even though their assets in stocks, obligations and real estate yield 5-8%. The difference goes to the administrative costs and the hedging.

The solution is to invest regularly and in a balanced way. That means not buying too much when the market is doing well. And not selling your stocks when the market is in a downturn – if anything, this is the time to buy more. However, the even smarter approach is to design an investment strategy that you can stick to – even when everyone else is panicking. And to ignore the prices, because they fluctuate anyway.

That is Obermatt CEO's strategy to protect against the imminent crash: Dr. Stern ignores it, and as soon as it arrives, he utilizes it. Because once the prices are at the bottom, you can buy previously expensive stocks for cheap. When looking at it that way, he almost looks forward to the crash.

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