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The myth of the ideal investment period: What you really need to know about your investments

In today's fast-paced world, characterized by an overabundance of information and rapidly evolving capital markets, it is more important than ever to separate myth from fact. Zsolt Janos , an expert in capital markets and economics, sheds light in this analysis on a widespread misconception: that of the so-called "minimum investment period".

While geopolitical events and instant news cycles influence markets, the financial world remains one of the last bastions where corporate announcements still carry substance. Yet even here, pitfalls lurk, particularly when it comes to promises surrounding investment horizons . Let's take a closer look at this myth.

The deceptive promise of the "minimum investment period"

Have you ever heard a salesperson say, "You should hold onto this investment for at least this long to guarantee a certain profit"? For financial experts like Zsolt Janos, this statement is a major red flag. Why? Because it ignores two crucial aspects:

• The The evaluation will be postponed to the future.The investor is given false hope that the investment will pay off "someday".
• Risk parameters and volatility are concealed: The customer receives no information about the actual fluctuations and risks of the investment.

A securities portfolio can usually be sold daily. Recommending a rigid minimum investment period suggests a level of security that simply does not exist in the capital market.

Costs and their impact on your return on investment

A common, often opaque reason for recommending a longer investment period is the amortization of the acquisition costs. With many traditional financial products, the main costs, such as issuance fees , are incurred at the beginning of the purchase. These can quickly amount to 4 percent or more.

What does this mean for your actual return ? If you had 4 percent costs, your investment doesn't start operating at 100 percent, but effectively at 96 percent . A 4 percent increase in value will then only bring you to the break-even point, not into profitability. The product first has to make up for this initial expense before it can generate profits.

Some products are even more opaque, with cost burdens of up to 10-15 percent , and in the past even up to 25 percent . The "market return" presented to the customer, i.e., the performance of an index or specific markets, often has little to do with the real return the customer achieves after deducting all costs.

Volatility and risk: The true drivers of the capital market

The far more important aspect when considering investment horizon is volatility – the range of fluctuations in an investment – ​​and the associated risks. While a longer time horizon may make short-term access to money more difficult, it by no means guarantees a specific return or even the absence of losses. The stock market always factors in future expectations.

Zsolt Janos illustrates this with a striking example from the dot-com bubble: Companies like Cisco were valued at extremely high growth rates (e.g., 50 percent per year ). When management announced that these expectations could no longer be met (e.g., only 30 percent growth), this not only led to a revaluation of Cisco but also triggered a chain reaction that engulfed the entire internet industry, resulting in massive sell-offs and bankruptcies.

Such parabolic rises , like those we are currently observing in certain sectors (e.g., artificial intelligence), will eventually correct. Therefore, the focus should not be on an arbitrary investment horizon , but rather on a thorough analysis of historical performance, risk parameters (e.g., maximum drawdowns ), and current market noise. This is part of sound risk management for your investments.

What characterizes realistic wealth management advice

Instead of making unrealistic promises of profit, professional wealth management should prepare investors for the real challenges. This includes an open discussion about:

• The historical development the chosen investment category or sector (e.g., during crisis years such as 2000, 2008, 2011, 2015, 2020 or 2022).
• The parameters that led to price increases and massive corrections.
• The ability with fluctuations to deal with them and integrate them into one's own strategy.

Zsolt Janos emphasizes that bonds, under certain conditions (e.g., a triple-A rating ), can offer greater predictability, but that when it comes to investments in the economy and the capital market , the claim of a "guaranteed profit" over a specific period is very risky . An informed investor who understands the risks feels more comfortable and secure in their decisions.

Conclusion: Knowledge instead of illusion

The myth of the "ideal investment period" promising guaranteed returns is a dangerous oversimplification. Sound investing , whether in stocks or other financial products , requires a deep understanding of risks, volatility , and the complex dynamics of the capital markets in Austria and Germany . Those who embrace this reality feel more comfortable and are better prepared for the challenges ahead.

It's not about not thinking about it, but about asking the right questions and understanding the answers. Honest and transparent financial advice based on realistic assessments is the key to the long-term success of your investments.

Your personal wealth management

Do you want to put your investment strategy on a solid and realistic footing? Then get in touch with Zsolt Janos for a personalized wealth management consultation .

Learn more and schedule an appointment at: https://www.zsoltjanos.at/vermoegensberatung