This year’s developments in capital markets, which fell in March from a historic pandemic just a few weeks earlier due to a pandemic and then rose sharply, have attracted the attention of the general public, including young people. A wide range of user-friendly mobile applications, which allow you to trade on stock exchanges for zero or very low fees, has also helped. “The vision of a seemingly workless income is interesting for young people. At the same time, they usually do not want to think too much about investments. They demand simple and straightforward products that are connected with a topic that is currently interesting to them, “says Vácha in an interview from the special PFI Talks series, which you can watch in the form of a video or podcast.
Regardless of the age and amount of assets, the basic goal of most investors is to increase their money by at least inflation so that their funds retain purchasing power. According to Vácha, however, the traditional view of inflation as a change in the price of a consumer basket can be problematic for investment purposes. “Everyone should answer the question of inflation individually. For some it is the price of bananas, for others it is important for the price of his real estate, of which he has a large share, “describes Vácha, adding that as Czech society gets richer, it invests relatively more and consumes relatively less.
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According to Vácha, this is also one of the reasons why real estate prices in the Czech Republic have risen so fast in recent years. “Real estate is an idol for Czech investors. They consider them something that is absolutely safe. It’s the brick that no one can pick up from them, they can touch it, it evokes emotions in them. In reality, however, such an idea is a chimera, “says Vácha. According to him, price volatility is also associated with real estate, but it is not so well visible. “When you buy a house, no one overestimates it every day. He does not say that it is now a hundred thousand more expensive, or half a million cheaper. But until you sell it, you don’t know what it’s really worth. That’s why you get the false impression that it’s a completely stable investment, “he adds.
Investing in real estate can still be profitable, but according to Vácha, people should take into account that the profits from this type of investment may change over time. “If I buy an apartment with the vision that it will bring me five percent a year from the rent, it may end up being only two percent in five years,” says Conseq’s sales director. According to Vácha, even the second component of the return on real estate investment – the growth of their market price – can no longer be relied upon as before. “There will definitely be some cooling in the real estate market. Stagnation can be expected in at least some segments, but a smaller decline may also come. On the other hand, I would not expect too much disaster. A lot depends on what types of real estate we are talking about and in what location. ”
You can listen to the podcast here.
In addition to the traditional diversification between assets such as shares, government and corporate bonds, real estate and other alternative investments, Vácha makes sense to work with various investment styles in the portfolio. Active investment can thus be complemented by a passive strategy, for example in the form of low-cost investments in ETF funds that copy stock indices. However, according to Vácha, the popularity of such investments has recently been growing so much that the volumes traded in this form are already approaching the limit beyond which markets begin to lose one of their basic functions – directing money where it makes economic sense. “In recent years, so-called growth stocks have been very successful, often technology companies such as Tesla, which are securities of companies that are growing very fast, but the vast majority do not yet generate any real profit for their shareholders. Nevertheless, investors are now able to pay unreasonably high multiples of annual sales for these companies. “
Whatever strategy or combination of assets an investor chooses, according to Vácha, he should always keep in mind the fact that investing is associated with investing. “There is no such thing that I will have a high yield and no worries, that cannot be torn apart,” concludes Consequ’s sales director.
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