"That was an excellent investment!" With this thought, Max, a young private investor, leans back and relaxes. A few months ago, he had bought shares in a DAX company, whose share price then rose by 15 percent. What's more, at 10,000 euros it was one of his largest individual positions. Therefore, he felt like a winner.
But a few days later he becomes pensive. A positive analyst’s comment has caused the share price to rise by another five percent. Max had scored a hit, but the game had gone on, and without him. His initially successful trade now looks like he did something wrong. This is an experience that pretty much every investor has had at one time or another.
The Show Must Go On
It is obvious that you cannot regularly buy at the low and sell at the high. Everyone knows that. But on closer inspection, there is something else behind it that perhaps not everyone is aware of: investing is a "never-ending game". In the process, decisions to buy or sell securities are constantly being actively made (in the case of short-term trading) or deliberately not made (in the case of long-term investments).
Investing money is an "endless game".
As long as a position is open, the question is whether or when it should be closed or increased or decreased. And as soon as the position is closed, the question is what to do with the proceeds: Will the money be used for a holiday trip, for example, or will it be used to open a new position in the next promising stock? Alternatively, one could invest in an actively or passively managed fund to reduce the effort of continuous monitoring. Or the money could be held temporarily as cash because of a bad stock market phase, to be used later to buy bargains.
No matter how you look at it, there is always a latent need to make decisions. Every day, opportunities and risks have to be reassessed. This requires attention and can be quite exhausting over time. Especially when things don't go so well and you are "compensated" for your efforts with losses.
Opportunities and risks have to be assessed anew every day.
This experience is not only made by private investors, but also by professionals like the well-known US fund manager Cathie Wood: In 2020, she was one of the biggest winners with triple-digit percentage returns. But the game went on. And in the first half of 2022, she was suddenly among the biggest losers. An interesting alternative can therefore be attractive, quantitative strategies that implement reproducible signals independently of subjective assessments.
Cards are shuffled
Like the stock market, the entire economy can be seen as a never-ending game: Companies come and go, compete with each other, gain or lose market share and so on. This is the nature of a system that ultimately produces productivity gains and technical progress. In the process, the cards are reshuffled a little every day, because everything is constantly changing and nothing is really certain. Over time, the rules of the game themselves can also change. At the same time, existing risks and uncertainties are also opportunities and make new chances and competitive advantages possible.