Investors put to the test

By spreading your investments across shares and bonds, amongst other things, you can build an investment portfolio that has a balance between risk and return that is suited to you.

• Shares are the best performers over the long term, but interim fluctuations may be high. It is therefore best to limit the weighting of shares to a predetermined percentage of your investments, depending on your investment profile
• As a rule, bonds are the stabilising factor. They fluctuate less in value than shares and usually perform well when shares are struggling

Many countries are experiencing their highest level of inflation in decades. Central banks are raising their key rates to combat inflation, but in doing so, they are putting the brakes on economic growth, which in turn is putting pressure on corporate earnings, resulting in lower share prices.

Higher interest rates are also pushing down bond prices because existing bonds with a low rate become less interesting when new bonds yield a higher rate.

As a result, share prices as well as bond prices have depreciated this year, and that is quite unusual. The fall in bond prices this year has been particularly unprecedented.

Lower prices of shares and bonds put pressure on the value of your investments. However, the fund manager of your investments is not idly standing by and watching the markets.

• In the mixed funds, the fund manager is now investing less in shares and bonds, and cash accounts for a more significant part of your investment. Its return is still low, but it cannot depreciate in value. Safety is its biggest asset
• In the bond component, the fund manager is opting for short maturities because short-term bonds will depreciate less if interest rates continue to rise
• In the stock component, the fund manager is opting for sectors that are less dependent on the economic situation, such as the pharmaceutical sector and household goods manufacturers

The current economic picture with high energy prices, high inflation and faltering economic activity may look rather bleak in the short term, but it will almost certainly be followed by a period of economic recovery. And that’s when the prices of shares and bonds will also recover.

It is therefore important to stay invested, even if you are seriously being put to the test as an investor today. If you get out of the market now, you will suffer a loss and moreover depress the chances of a recovery. It is better to gradually buy in at low prices now via a standing order to lower your average purchase price and ensure higher returns in the long run.

Do not hesitate to contact your relationship manager for further questions about your investments.