Dusseldorf Inflation in Germany rose to 7.9 percent in May. In order to be able to counteract this increase in investment prices and to maintain the value of their money, investors currently have to achieve an annual return of at least 7.9 percent.
Equities have long been a promising source of returns. But rising prices and interest rates are depressing prices. In the Handelsblatt Today Extended podcast, stock analyst Ulf Sommer explains why, with the right strategy, stocks are still the best asset class to protect capital from inflation. Sommer presents three methods in the current episode.
Protection against inflation: stock market indices, dividend stocks or growth companies?
On the one hand, investors can rely on cheap stock market indices, which are very likely to rise in the future. “However, I recommend investing with this strategy for no less than three years,” explains Sommer.
The long-term investment horizon should also be taken into account when selecting the indices: according to Sommer, theme ETFs can lead to problems. They often reflect passing fads, so run the risk of crashing badly when the hype passes.
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The second strategy focuses on companies that pay dividends. The payout to the shareholders is a sign that the company has operated profitably. According to Sommer, the most important selection criterion here is regularity. The dividend yield alone, on the other hand, is not a reliable indicator when selecting stocks.
Sommer also sees potential for investors in growth stocks: “Stocks that rise above average then grow into their high valuations and deliver profits,” says the stock analyst. This strategy is therefore less risky than it first appears.
More: Asset classes in comparison – The first part of the conversation with Ulf Sommer.
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