The Way to Successful Investment: Why Simplicity, Continuity and Manageability are crucial

In the world of investment, there is often the impression that only the perfect, highly complex strategy can bring the desired success. Many investors are looking for the ultimate solution that eliminates all risks and promises maximum returns. But the reality is different: Investing success depends much more on a clear, actionable strategy that focuses on simplicity,continuity and control based. It’s less about owning the most complex product and more about developing a strategy that is permanently managed and oriented towards your own goals. This article shows why these factors are the key to sustainable success and how to use them optimally for your own investment.

The importance of simplicity in investment strategy

Many believe that only highly complex systems, sophisticated products and difficult-to-understand concepts make the difference. But the opposite is the case: The simpler a strategy is, the better it can be implemented and persevered in the long term. Complexity not only brings with it difficulty in control, but also increases the risk of making mistakes. a clear,Understandable strategy based on your own goals is much easier to integrate and maintain in everyday life. A proven principle in the world of investments is that you can achieve a large part of the results with a comparatively small part of the effort. This principle can be applied to the investment: With a simple, well thought outStrategy based on clear rules can be achieved a large part of the possible success. It is not necessary to own the most expensive or sophisticated products. Rather, it is crucial to break down the complexity in such a way that it remains manageable.

Continuity: The Underestimated Secret of Success

In addition to the simple structure, continuity in the implementation of an investment strategy is of great importance. The financial industry is a world full of short-term hypes, constantly changing trends and sensationalist reporting. New products, new approaches or supposedly better ways to increase capital are constantly appearing. tempt these constant changesMany investors to adapt their strategy over and over again, to re-lay or to restart. But a sustainable strategy should rather bore you after a certain time. It should be designed to remain true to it, even if the markets are fluctuating. An experienced asset manager once stated that the essence of a successful investment philosophyis to have an attitude that you can consistently adhere to through all market phases. Imagine you want to achieve a specific goal in the long term, such as building asset for old-age provision. What is more likely to achieve this goal: Constant testing of new, short-term trends or adherence to a proven, continuousstrategy? The answer is obvious: continuity and adherence to proven principles are the key. The example of losing weight illustrates this logic: Anyone who permanently changes a healthy diet, consumes less fat and sugar, eats more fruit and vegetables and exercise regularly achieves better results in the long term than trying new diets all the time. atInvesting is similar: a clear, simple rule that is consistently followed brings the greatest success in the long term. It is the discipline that makes the difference – not the constantly changing short-term trends.

The right choice of product: ETFs as a solid foundation

Before you even start investing, it is important to choose the right product. A passive investment form is often recommended, namely ETFS – Exchange Traded Funds. These funds reproduce an index, i.e. a wide group of companies, without being actively selected or controlled by a fund manager. This means that with ETFs you can create a market-oriented,Cost-effective and above all transparent solution. In comparison, there are actively managed funds that are trying to beat the index through analysis and market forecasts. This strategy is seductive, but in practice it is usually expensive and inefficient. You take higher risks because you are trying to “time” the market and select individual titles. This is comparable to oneShot project that sometimes hits, but usually only does damage. ETFs, on the other hand, simply buy all values that are included in the respective index and reflect them exactly. This avoids most unsystematic risks. In addition, ETFs are significantly cheaper in administration, since no expensive management is necessary. The costs are often only a fraction of the fees,the funds that are incurred at actively managed funds. Another important advantage: ETFs are so-called special funds. In the event of the product provider’s insolvency, the investors’ money remains protected and is separate from the issuer’s assets. This means that the capital invested is safe even if the provider becomes insolvent.

ETFs are just the tool – not the goal

But at this point an important warning: An ETF is just a tool, not a panacea. It is comparable to stones: used correctly, you can build a house out of it. used incorrectly, you can also injure yourself with them. The first disadvantage: There are a variety of ETFs on the market, most of which are unsuitable or even harmful. It’s hard to believe, but itThere are now thousands of products that rely on niche regions, fashion themes or speculative strategies. Some bets on falling markets, others try to make profits with exotic strategies – often these products are unstable, not very transparent and hardly suitable for long-term asset accumulation. Even more problematic is that many private investors use ETFs toConstantly shifting to get the supposedly best time on the market. However, the constant shifting back and forth in the portfolio usually leads to suboptimal results, because you often make wrong decisions and drive up the costs unnecessarily. Despite using a supposedly safe product category, these investors often achieve worse returns thanThose who pursue a more stable, long-term strategy.

How to build a meaningful portfolio with ETFs

So how can you build a sustainable and stable portfolio with ETFs? The solution is in a clear, proven division: A low-risk share that protects assets and a risky share that provides long-term returns. The low-risk share should consist of short-term bonds issued by high-class states or companies. thatThe aim here is to invest the capital as securely as possible in order to have a stable basis in times of crisis. The term is kept short, a maximum of three years to minimize price fluctuations. It is important not to neglect this building block, even in good times, because it serves to protect in bad phases. In the past, long-term government bonds haveLow interest rates hardly worth it – the yields were low and often even negative after taxes. This shows that a secure bond share proves its value, especially in times of crisis. It’s not about short-term profits, but about stability and security.

The limits of creditworthiness and term

Possible strategies for increasing bonds are the investment in bad credit or longer terms. Both increase the potential return, but also the risk. If you have poorer credit ratings, for example, countries or companies with a lower rating, you get higher interest rates because the risk of not getting your money back is increased. However, these areHigher interest rates are currently hardly available, and risks are increasing sharply in times of crisis. Especially with longer terms, an interest rate increase of only one percent can cause exchange rate losses of the order of ten percent. This means that investment in long-term bonds in periods of rising interest rates may be associated with significant losses. Furthermore, increase inTimes of crisis The risks of bonds from companies or countries that are already financially struck. Such papers often react as violently as stocks, which makes them unsuitable for the safe part of the portfolio.

Diversification in the risky share

The risky part of the portfolio should be widely spread. Instead of relying on individual companies, sectors or regions, global diversification is recommended. An index that depicts a wide range of countries, industries and company sizes is ideal here. An example is an index that includes the most important markets worldwide, including emerging markets and small companies.An ETF on such an index offers a wide range, minimizes risk and increases the chances of a reasonable return. This strategy is simple, transparent and stable in the long term.

Simplicity is the best strategy

You may now think that this approach is too simple to be successful. But it is precisely this simplicity that makes it so robust. As an asset manager, I see every day how difficult it is to consistently maintain a complex strategy over the years. Many investors are seduced by short-term trends and are constantly changing their portfolio. This almost always leads toworse results. If you really want to pursue a long-term strategy, then rely on a few well-chosen building blocks. Three ETFs are suitable for the risky share: one for large companies in industrialized countries, one for emerging countries and one for smaller companies worldwide. The weight could look like this: the majority in the global stock index, aSmaller position in emerging markets and another in small caps.

Beware of supposedly better solutions

Of course, there are much more complex approaches, such as so-called factor or smart beta investment. Equities are weighted according to certain criteria that allegedly promise higher returns. But here, the greatest caution is important: Many factors are only relevant in the short term and the results vary greatly. There is a risk that you will focus on trends that will quickly recurturn back, or make your own false assumptions. In addition, empirical studies have shown that the promised premiums often only occur temporarily for certain factors. There are phases when these premiums are absent or even negative. The so-called reference framework risk describes the risk that the expected additional return will never occur or even temporarilynegative slides can.

The essence of successful investments

My final advice is: keep it simple and consistent. Avoid constantly struggling with your portfolio. Rely on proven, wide building blocks that you can regularly save and track in the long term. Complex strategies may be tempting, but they are hard to keep up and often more expensive. If you have the desire for more time and energy inInvesting in the optimization, you only do this if you really enjoy it and can remain disciplined in the long term. For most investors, however, the best strategy is to use simple, understandable principles that are stable in the long term. Continuity, discipline and the ability to pursue the strategy through all market phases are ultimately the decisive onesFactors for the sustainable success of your capital investment.