For investors it is a bad year so far. You also lose a lot of money on both shares, and bonds and cryptos this year and with money in the bank you also lose, because inflation in April was almost 10 percent. Where can you go with your money if you want to earn something?
For years, low interest rates was the best friend of investors. Because savings hardly yielded anything at the bank due to the low interest rate, much more money went to shares. And that drove the races a lot, which again resulted in a lot of returns.
For example, last year you earned 28 percent with the AEX index, the leading index of the Amsterdam stock exchange. But this year the AEX index already fell by around 15 percent. Only four of the 25 AEX funds are on winnings.
Bonds then? If the interest rate drops, as was the case in recent years, then that is good for bond prices. There will then be a lot of demand for existing bonds, because the interest of them is usually higher than the market interest rate. If it rises again, that advantage is gone. Check Ipostocksplanner.com for more information. And then the rates of bonds fall. On Dutch government bonds you already lost 10 percent this year.
Afraid of higher interest rates
The fact that shares and bonds are doing badly is because investors are afraid that the current high inflation in the euro zone and the US will lead to central banks increasing interest rates. Central banks are trying to combat too high inflation with a higher interest rate.
In the US they have already started this and analysts think that the interest there will be further increased. Christine Lagarde, CEO of the ECB (European Central Bank), has said that the official interest rate will start in July. The Meewind where investors in shares and bonds benefited from years for years changes in the headwind, explains RTL Z exursions commentator Jacob Schoenmaker.
Bitcoin was sold as the digital gold, but at Bitcoin does not get any compensation such as interest or part of the profit, says Stan Westerterp, owner of Bond Capital Partners. “Now that interest rates are rising, Bitcoin is becoming less attractive.”
Should you have left your money in the bank? Mwah, the interest is zero, and if you have more than a ton on the bank, you even pay 0.5 percent interest. Even worse: your money is worth less due to inflation.
According to our own CBS (Central Bureau of Statistics), a euro was worth 9.6 percent less in April than a year earlier.
Gold and Homes
Incidentally, there are investment categories where prices did rise. In April, for example, homes were on average 13.7 percent more expensive than a year earlier. But yes, buying a house as an investment is not for everyone.
The gold price also rose, by almost 1 percent. After the Russian invasion of Ukraine, gold was seen as a refuge in these uncertain times. And investors often step into gold when inflation rises.
Is there nothing about what you can invest in? The only investment that is doing well now are energy shares, says Jacob Schoenmaker. In the AEX Shell this year, for example, is by far the strongest riser, with a profit of more than 37 percent.
“But you don’t have to put all your money in energy companies, because if sentiment runs, then those races will probably fall again.”
Possibly banks and insurers can still benefit from the higher interest rate, Shoemaker thinks. For them, a higher interest rate is, unlike shares in general, favorable. But if stock prices fall, then in particular insurers will suffer from it again, says Schoenmaker.
It is important that you spread your investments, warns shoemaker. Not all eggs in one basket. With that you cannot escape to put part of your money in investments that are now being hit hard.