Friedrich Mostböck, Head of Group Research, Erste Group, Vienna, Austria
What investment type would you recommend, Mr Mostböck? Gold, shares or just the good old piggy bank?
Mostböck: Well, extremes are rather far apart here. Frankly speaking, there is no secret recipe for determining what would be the best investment in general. The answer depends on many different factors: personal risk aversion, the investment horizon and, last but not least, the expected return. Interest rates are currently at a historic low. The global economy is growing very slowly, if at all, and future expectations are similarly moderate. In this environment I would say that shares are certainly worthy of serious consideration in the long run. However, a careful selection always has to be made. Which companies have a sound, credible strategy? What value do the shares currently have? As a rule, the investment horizon for shares should be from three to five years and one shouldn’t be unsettled by the daily fluctuations in price.
“I have mixed feelings about gold.”
I have mixed feelings about gold. The market price of gold and its use as a crisis currency make it a natural investment vehicle, but it does not generate interest. As an asset class, it should therefore only represent 5% to 10% of a portfolio at most. A life insurance or pension policy is naturally advisable for long-term provisions, and here it is also important to choose the best solution from the wide variety of products available. Finally, units of well-structured real estate funds offer the possibility of further portfolio diversification. In summary, the same considerations apply for private and large investors alike. Regardless of how confident one is about the future, an investment strategy should be chosen that – as previously mentioned – matches one’s personal risk aversion and resists tempting promises of above-average returns. I would advise against saving in a piggy bank (not a savings account) or under the mattress. As a result of inflation alone, both of these methods cause your money to lose value faster than you think.
“A life insurance or pension policy is naturally advisable for long-term provisions.”