The biggest investment myths in fact checking

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

Those who leave their money in savings accounts enjoy little real growth, as interest rates are only slightly above inflation on average. If you want to increase your wealth in the long run, you can count on investments. This presents opportunities for reversal, but also carries the risk of price losses. In the past, the Swiss stock market grew at an average of 7 percent per year. In the same period, the savings account provided an annual return of around 0.6 percent.

Only one out of every two households is making a deposit

The reality is that only half of the households invest their money, as a survey of more than 3,000 households in Switzerland by PostFinance and the Lucerne University of Applied Sciences and Arts showed. There are many reasons for this: According to the research, not enough money, fear of losing and lack of knowledge about financial markets and investment products are the most important reasons why respondents do not invest their money. But the perceptions are very different. In the survey, one in five people with an account balance of more than CHF 100,000 say, “My assets are too small to invest in the financial market.”

But anyone who puts biases to a fact-check can debunk investment myths and amass financial knowledge. One important point is that, as study author Andreas Dietrich, from the University of Applied Sciences and Arts in Lucerne puts it: “It is important in Switzerland that interest in financial markets, and therefore financial knowledge, has increased in various ways.”

Statement 1: “Investing is only for the rich”

41 percent of respondents agree with the statement of non-investors, “Investing is only for the rich”. “My assets are too small to invest in the financial market,” 66 percent say.

These statements are not always true: you can invest starting from 20 francs per month using a funds savings plan at PostFinance. This offers opportunities for returns and can compensate for price fluctuations through regular deposits. A fund-saving plan offers opportunities for returns with extremely low risk. On the other hand, if you leave 100,000 francs in the savings account, you will have approximately the same amount of money in your account after a year as at the current interest rate. It’s also a few francs less, due to the financial institution’s fees and inflation causing prices to rise.

Statement 2: “I don’t know about investment products”

PostFinance and the Lucerne University of Applied Sciences and Arts’ 2022 Investment Report show: fear of loss and poor financial knowledge are the most common reasons adults don’t want to invest their money. 70 percent of non-investors believe they lack the knowledge to invest.

In fact, terms like medium-term bonds, funds, or structured products can make savers nervous. Stocks also come up repeatedly in the media when there are extreme price fluctuations. But you don’t need to be an expert to evaluate your savings. With a good division of fixed assets into different investment products and the advice of financial experts, even beginners can invest their money.

Phrase 3: “Exchanges are like casinos”

Almost half of non-investors agree with the phrase “casino”. This probably has to do with the fact that individual share prices are a cause for concern when their value increases or decreases drastically. Prices of stocks, funds or bonds can fluctuate, which can make investors nervous.

That’s why it’s important for investors to bet on different stocks or investment products. This reduces the risk of price loss. It is also recommended to invest with a longer time horizon. If you’re saving up for a world tour next year, you shouldn’t invest in securities. If you can value your money for the longer term, you have a greater chance of gaining value with securities investments.

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

63 percent of those who have not yet invested agree with the above statement that came out of the research. But even those who are already investing are afraid of making mistakes in their systems. This has to do with the price fluctuations mentioned earlier and the question: when to enter and when to exit?

Consider the share price of the world’s most valuable company: Apple. In December 2012, an Apple share was $18. In April 2013, the rate dropped below $14. Ten years later, in early 2022, the price rose from $145 in December to $182. This illustrates the dilemma: when to buy, when to sell? No one is immune from “mistakes” when investing, but such price fluctuations can be mitigated with the right strategy, risk capacity and willingness to take risks, and portfolio diversification. The right strategy can be determined by the investor profile.

It is appropriate that 51 percent of the investors surveyed said that professional investment advice was important to their decisions.

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

“Banks are taking money out of my pocket,” say more than a third of those surveyed who do not invest. In other words: They don’t trust professional providers. Whether the cost is reasonable is a relative matter. Basically, financial institutions are concerned with bringing an attractive offer to the market. The more satisfied the traders are, the higher the volume, the higher the profit can be. It is clear that asset management has a cost. Anyone who deals with systems himself knows how long this will take.

Conclusion: Investing is easy, but…

The Investment Report 2022 shows that, as PostFinance Director of Investment Philipp Merkt wrote in the study’s concluding notes, “Investing in money can be quite intimidating.” Fear of loss, little attention to financial matters, or the belief that investments require too many assets deters savers from investing.

You can invest in securities with little money. It can obtain or have it explained with little effort the necessary information to find the right investment strategy.

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