Investing in times of crisis

Name: findependent
Brand: findependent
Rating: 5.0 (80 reviews)

What you need to know about the current market situation

Fluctuations are part and parcel of investing. Major turbulences, such as those we are currently experiencing, also occur from time to time. But even if they don’t feel good, it is important to persevere and hold on to your investments.

In this blog post, we would like to put the current situation into perspective and thus reduce any uncertainties and doubts. In doing so, we will answer the following questions:

What is happening in the financial markets right now?
How bad is it? Where do things go from here?
What does this mean for my investment solution?
How is findependent reacting?
What can I do?

What is happening in the financial markets right now?

It is often difficult to explain exactly why and to what extent share prices fall or rise. Currently, the reasons for the broad price losses are most likely to be attributed to the economic concerns that have arisen in the USA, the world’s largest national economy.

Last Thursday and Friday, the publication of two closely observed pieces of US economic data led to immediate declines in prices. Firstly, a monthly survey of US companies in the manufacturing sector (ISM Manufacturing Index) revealed that many participants expect significantly fewer orders in the foreseeable future and are more likely to lay off workers. Secondly, the increase of the US unemployment rate was higher than initially expected. Both indicators were taken as clear signals that the US economy will cool down. Fears of a recession are spreading. Many investors now fear that companies are facing a bad times ahead and are therefore selling their shares, which is why the prices of many shares are falling and with them the prices of investment solutions that include such shares.

How bad is it? Where do things go from here?

Sure, it doesn’t feel good when the value of your investment solution falls sharply or you are even in the red. If you look at the past, you will see that market turbulence and bad phases have always been part of investing. However, no one can predict with certainty how often they will occur, how long they will last and how strong the turbulence will be. Just as little is known about how the situation will develop from now on and how quickly the markets will recover.

A look at the past shows that the economy has always overcome even major crises such as the financial crisis of 2008/09 or the Corona crisis in spring 2020.

Development of the Swiss stock market measured by the Swiss Performance Index (SPI), financial crisis and Corona crisis marked.

During the financial crisis, the Swiss stock market (SPI) fell by a full 50% within 1.5 years and finally had recovered completely after a little more than 4 years. And in the “Corona Spring” of 2020, the SPI fell by 26% within one month – the fastest collapse in the history of the SPI. At the beginning of 2021, however, and thus long before the Corona situation had improved significantly, the price was already back at its pre-shock level.

These and other examples show that it can be assumed that the markets will very likely recover from the current drop over time.

What does this mean for my investment solution?

With your findependent investment solution in ETFs, you are deliberately widely diversified. In fact, in more than 3,000 individual assets, spread across various sectors, countries and regions. This has an enormous advantage, especially in times of crisis.

Your investment solution would only fall to 0 francs if all these several thousand companies went bankrupt and their equities became worthless – and that is extremely unlikely.

Because even if some companies go bankrupt or some sectors never fully recover, the vast majority of companies will overcome the crisis. This can happen very quickly, as in the Corona Spring of 2020, or it can take years, as after the financial crisis of 2008, and depends on how quickly the situation calms down again. But in the end, the global financial markets have survived every crisis so far.

How is findependent reacting?

With findependent, we pursue a passive “buy and hold” investment strategy. Our broad-based investment solutions are geared towards long-term investing. We only select the best ETFs. These are managed by established institutions with a good reputation and in accordance with clearly comprehensible principles. We regularly review the ETFs used and their weighting but even then we generally only make small adjustments.

We deliberately do not react actively to market developments. findependent has asked you extensively about your financial situation, your goals, your experience and your preferences when you created your account. Together we have defined a suitable investment strategy: We have a clear plan. findependent is now implementing it for you without compromise.

Current market developments have likely resulted in the weightings of various equity ETFs being substantially lower than a few weeks ago. As soon as the weight of your equity investments falls below a predetermined value, findependent will carry out a so-called “rebalancing” for you, i.e. ETFs with too low weights will be bought at the current lower (and probably more attractive) prices.

Discover the findependent investment solutions

Do you need another overview of how long-term investing with ETFs works and how exactly the value of investments comes about? Then you’ll find the answers in this blog.

What can I do?

Even if it’s not easy, waiting and sipping some tea is the best thing you can do right now.

Successful investors always hold on to their investments, in both good and bad times. This way, you will certainly not miss out on the next upswing and will be more successful in the long term than if you were to sell your investments now at low prices. This would turn the (probably temporary) loss on paper into a (permanent) realized loss.

Especially in bad times, we recommend investing regularly. Because when prices are low, you get more ETF units for your money compared to when prices are high. If you invest at regular intervals over several points in time, you will be more successful on average than if you try to bet on the “perfect” timing. We illustrate this so-called “dollar cost averaging” effect in this blog post based on the development during the “Corona year” 2020.

Either way, you should avoid making emotional decisions and stick to your current strategy instead. To help you succeed, we have a few tips for you below:

Don’t drive yourself mad by constantly checking your investment in your investment app.
Don’t waste your time and energy reading financial news.
Don’t fall for the belief that experts can predict the future better than you. Especially in times of market turbulence, many notorious “prophets of doom” take over the stage and proclaim their horror scenarios with which they earn their money.
Don’t forget your long-term investment horizon in the daily flood of information.
Focus on what you can control. Now is a good time to analyze your spendings and consider whether you could actually save and invest more of your salary.
You may need to be patient for longer – it’s good to be mentally prepared for this.
Every crisis also offers opportunities. If you have savings that you certainly won’t need in the next 5 years and have actually been waiting for the right moment for a long time, then opportunities are now opening up. Of course, you are unlikely to catch the perfect moment, but if you are patient and, above all, make new investments in stages over the next few months, you will be successful in the long term.