Do you know what you want?

Good Morning Ladies and Gentlemen

«I always felt that failure was a completely underrated experience.»

Kevin Kostner

After my last weekly mail, I got involved in exciting conversations with some readers. The recession topic is certainly not off the table, and especially for our friendly northern neighbour, Germany, I believe a shrinking German economy is something we all have to get accustomed to under their current government.

However

I would not be surprised to see attractive returns in the financial market still this year. The adverse reporting by many media, banks, analysts, etc., is quite often a good counter-indicator and yet, any broader recession in the coming year also seems possible to me. Cooling labour markets in Western economies at a time when China cannot pull us out of the muck could have unpleasant consequences for the real economy and, thus, for capital markets, which would probably and traditionally anticipate such.

Do you know what you want?

Today’s «Stefan’s Weekly» runs under the title «Do you know what you want?». I came up with this topic because I am gaining the impression that many market participants do not know what they want or expect from their investments. Making money certainly is one expectation, and low volatility is probably another. Unfortunately (No.1), there is a relation between volatility as a risk measure and return. There is no free lunch, Ladies and Gentlemen, and the price you pay for your return is risk (or volatility). Unfortunately (No.2), by taking on the risk, you cannot expect automatically to receive a return.

I know

This seems utterly unfair, yet this is just how it is. Ladies and Gentlemen, I know of people with millions of cash sitting in their bank accounts. They are losing purchasing power year after year, which they know and readily accept as long as they do not have to accept market volatility. They cannot handle it and know that and are willing to pay the price of a loss of purchasing power in return for their peace of mind. Fair enough; at least they know what they want or do not want.

Tangible and productive

As an owner of equities, you are a co-owner of a business. This seems like a pretty good deal because co-owning a business means you have a somewhat tangible and productive asset in your portfolio. However, it is crucial to choose suitable investments; overpaying on price/earnings ratios and/or book value, etc., never seemed very attractive to me. If you invest in a cash flow-generating business with a proven track record and are not stressed out in the short term, you will probably be compensated for your investment in the long term. You will probably not have the fantastic returns of the (Nasdaq) potential high-growth companies, but you will not have to endure the, at times, nerve-wrecking volatility of such an investment either.

This is why

You need to know what you want, i.e. expect from your investment. If you are clear about that and invest accordingly, your peace of mind will come about.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li