The biggest investment myths in a fact check

The Investing Report 2022 by PostFinance and the Lucerne University of Applied Sciences and Arts shows: Fear of mistakes and losses are the most common reasons why adults do not want to invest their money.

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Switzerland is known as a financial center. As a banking country. And as a nation of savers: According to the OECD, Switzerland ranks first in Europe with a savings rate of around 20 percent or CHF 1,400 a month. Private old-age provision, better known as the 3rd pillar, is also popular: according to the Federal Statistical Office, 60 percent of the employed pay into it regularly.

Those who leave their money in savings accounts benefit from little real growth, since interest rates are on average only slightly higher than inflation. If you want to build up your wealth over the long term, you can rely on investments. This offers opportunities for a return, but also carries the risk of price losses. In the past, the Swiss stock market grew by an average of around 7 percent per year. The savings account yielded around 0.6 percent annually in the same period.

Only every second household invests money

The fact is that only half of households invest their money, as a survey by PostFinance and the Lucerne University of Applied Sciences and Arts of over 3,000 households in Switzerland shows. There are many reasons for this: according to the study, not enough money, fear of losses and a lack of knowledge about financial markets and investment products are the most important reasons why those surveyed do not invest their money. But the perceptions are very different. In the study, every fifth person with an account balance of more than CHF 100,000 says: “My assets are too small to invest in the financial market.”

But anyone who subjects the prejudices to a fact check debunks the investment myths and can build up financial knowledge. An important point, as the study’s author Andreas Dietrich from the Lucerne University of Applied Sciences and Arts notes: “It is important that interest in financial markets and thus financial knowledge in Switzerland are increased in various ways.”

Statement 1: “Investing is only for the rich”

41 percent of those surveyed who do not invest agree with the statement “Investing is only for the rich”. 66 percent say: “My assets are too small to invest in the financial market.”

These statements are not always true: at PostFinance you can invest from as little as 20 francs a month using a fund savings plan. This offers opportunities for a return and can compensate for price fluctuations through regular deposits. A fund savings plan offers opportunities for a return with a rather low risk. On the other hand, if you leave 100,000 francs in the savings account, you will still have about the same amount of money in the account after a year with the current interest rate situation. Depending on the fees of the financial institution and inflation, which causes prices to rise, but also a few francs less.

«It can make sense to invest a fixed amount over a longer period of time. This reduces the risk of investing all available assets at the “wrong” time.»Study author Andreas Dietrich

Statement 2: “I lack knowledge about investment products”

The Investment Report 2022 from PostFinance and the Lucerne University of Applied Sciences and Arts shows: fear of losses and little financial knowledge are the most common reasons why adults do not want to invest their money. 70 percent of non-investors believe that they lack the knowledge to invest.

In fact, terms such as medium-term notes, funds or structured products can unsettle savers. Equities also repeatedly come into focus in the media when there are extreme price fluctuations. However, you don’t have to be an expert to invest your savings. With a good division of the fixed assets into different investment products and the advice of financial professionals, even beginners can invest their money.

Invest money as needed

PostFinance offers various investment products. Depending on your needs, you can make your investment decisions yourself, get advice or delegate the investment decisions to the PostFinance experts.

Statement 3: «Stock exchanges are like casinos»

Almost half of all people who do not invest in investments agree with the “casino” statement. This is probably related to the fact that the prices of individual shares give cause for concern when they increase or decrease in value massively. The prices of stocks, funds or bonds can fluctuate, which can unsettle investors.

It is therefore important for investors to bet on different stocks or investment products. This reduces the risk of price losses. It is also advisable to invest with a longer time horizon. If you are saving for a trip around the world next year, you should not invest in securities. If you can invest your money for a longer period of time, you have the chance of a higher increase in value with securities investments.

Statement 4: “When investing, I am afraid of making mistakes”

Of those who have not yet made any investments, 63 percent agree with the above statement from the study. But even those who are already investing are afraid of making mistakes in their systems. This has to do with the price fluctuations already mentioned – and the question: when to get in and when to get out?

Consider the share price of the most valuable company in the world: Apple. In December 2012, an Apple share cost $18. In April 2013, the rate fell below $14. Ten years later, in early 2022, the price rose to $182, compared to $145 in December. This shows the dilemma: when to buy, when to sell? Nobody is immune to “mistakes” when investing, but such price fluctuations can be reduced with the right strategy, risk capacity and willingness, and portfolio diversification. The right strategy can be determined with an investor profile.

It is fitting that 51 percent of the investors surveyed say that professional investment advice is important for their decisions.

“Many customers are not sufficiently aware of what investing costs. There are also inexpensive ways to invest your money for all types of investments.»Study author Andreas Dietrich

Statement 5: “Banks take the money out of my pocket”

More than a third of all those surveyed who do not invest say: “Banks take the money out of my pocket.” In other words: They don’t trust professional providers. Whether the cost is reasonable is a relative consideration. Basically, financial institutions are interested in bringing an attractive offer to the market. The more satisfied investors invest, i.e. the higher the volume, the higher the profits can be. It is clear that asset management costs something. Anyone who takes care of systems themselves knows how much time it takes.

Conclusion: Investing is very easy, but …

The 2022 Investment Report shows: “Investing money can be pretty intimidating,” as Philipp Merkt, Chief Investment Officer at PostFinance, writes in the concluding remarks of the study. Fear of losses, too little interest in financial issues or the belief that investments require a lot of assets discourage savers from investing.

You can invest in securities with little money. Can acquire the necessary knowledge with little effort or have it explained to find the right investment strategy.

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