Is it worth getting rich

Investments: "If you want to get really rich on the stock exchange, you have to speculate brutally"

Published

Which stocks are worthwhile at the moment? And which ones do you prefer to stay away from? The Raiffeisen investment manager answers these questions in an interview.

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  • An analysis of stock market data shows how much money you have been able to make with Swiss stocks in recent years.
  • Depending on the investment period, investors were able to multiply their money many times over.
  • But in some cases there were also long dry spells on the stock market.
  • The savings account was hardly worth it in comparison.

Investing on the Swiss stock exchange pays off: Anyone who invested 1,000 francs in Swiss stocks a decade ago was able to almost triple their money by the end of 2019. Anyone who has already started investing beforehand can look forward to even greater returns (see photo gallery above).

If you are now considering entering the equity business, Matthias Geissbühler, Chief Investment Officer at Raiffeisen Switzerland, has a few tips in store:

  • Mr. Geissbühler, I have 1000 francs, how do I get rich on the stock exchange?

Anyone who wants to get really rich on the stock market has to speculate brutally. It's like betting on a single number in the casino. That can work out - but I would say that nine out of ten people who take extremely high risks lose on the stock market.

  • So isn't it worth buying stocks?

But. You may not get rich just now, but you can certainly build up your wealth significantly over the long term. If you have money that you can do without for a long time, you can't get around shares at the moment. Because it is definitely not worth putting the money in a savings account.

  • Which stocks are worthwhile?

In the Swiss Market Index (SMI), the building materials manufacturer Sika has seen particularly strong growth in recent years. I assume that this growth will continue. As in this case, it is often companies that you stumble upon in everyday life. The names of market leaders such as Geberit or Schindler can be found in almost every toilet or lift. It is usually worthwhile to join such companies.

  • So is the growth of the last couple of years all that matters?

It is not that easy. The Swiss Life share has also made extremely strong gains over the past ten years. But the share price was in the basement at the end of the financial crisis in 2008. So the performance is more of a recovery and does not necessarily indicate sustainable growth.

  • Do you recommend the really big ones?

Yes, Nestlé, Novartis and Roche have performed well in recent years. They have also continuously increased dividends. You shouldn't underestimate that, because dividends can easily make up 30 percent of total income.

  • Should one avoid companies that are now cutting dividends because of Covid-19?

The sustainability of the dividend payments is an important criterion when selecting stocks. Solidly positioned and well capitalized companies can maintain dividend payments even in a recession. When companies cut dividends, it is often not a good sign and usually also weighs on the share price.

  • Which stocks are not worthwhile?

There are certain industries that will not generate great value in the long term. This affects airlines and European banks, for example. Anyone who bought UBS or CS shares twenty years ago has not earned a cent from them to this day.

What is important if you want to generate as much income as possible on the stock market? With regard to the investment horizon and willingness to take risks, says Migrosbank chief economist Christoph Sax: "How long can I do without the money and can I bear exchange rate losses in the meantime?" With a long investment horizon and a willingness to take risks, Sax would rely on strategy funds or broadly diversified equity funds. If, on the other hand, you bet on individual stocks, the price fluctuations of the invested assets are usually higher. Sax's tip: "Those who start investing early can build up wealth over the long term." He therefore recommends a fund savings plan. This allows you to pay a fixed amount into strategy funds every month.

From the perspective of Migrosbank, the following stocks, for example, are currently worthwhile:

  • Roche: Sax sees growth potential here because the company has a high level of innovation. In addition, the pharmaceutical industry is very crisis-resistant.
  • Lafarge: The company is currently suffering from the coronavirus crisis. But she is making progress in expanding the value chain in the building materials sector and will probably be one of the winners of the upswing after Corona.
  • Logitech: The electronics manufacturer is benefiting from the high growth in the e-sports business and from the increased demand for home office applications.
  • Should you focus on Swiss stocks?

From a long-term perspective, Swiss stocks have performed better in the past. This is not least due to the Swiss franc. Anyone who invests abroad must take on additional currency risks - and some of them are considerable. For example, if the dollar falls in value, it indirectly affects all US stocks as well. That is why it is not really worth investing abroad - unless you want to invest in industries that are underrepresented in Switzerland.

That's when the technology sector comes to mind. We also have some well-known names, such as Logitech. But you won't find real giants like Apple, Amazon or Google in Switzerland. In many other industries, however, Swiss companies are already internationally active, so the focus is on domestic stocks.

  • How many different stocks should I buy?

For a diversified portfolio you need between 15 and 20 stocks. With 1,000 francs of capital, however, it will be difficult to buy so many different stocks. Alternatively, you can invest on the SMI or the Swiss Performance Index with so-called Exchange Traded Funds (ETF).

An ETF changes its value with the price of an index. So you can invest in the entire SMI without buying a share from every single company. If you don't want to rely on an index, almost every Swiss bank also offers its own strategy fund. This often includes not only stocks but also bonds, gold or real estate.