Learning from the Coronavirus Crash

The price drop of the DAX due to the coronavirus has scared investors. Yet in the long term, funds are still viable.*

In the space of one week, the DAX lost more than 10%, and stock buyers are cursing. The coronavirus has reminded investors that prices can change in two directions. That is no longer a matter of course because the policies of central banks have provided for a steady stream of money into stocks, and thanks to Donald Trump’s tax cuts in the U.S., companies are swimming in liquidity and using the money to buy back their own stocks. Accordingly, stock prices have been chasing records for months, even though the news from companies offers little reason for it.

Was the past week just a healthy correction or the harbinger of a dramatic crash? Should small investors now stay away from stocks? Investing in single stocks is certainly something for specialists and more of a hobby, but long-term investment in funds and investment in order to take part in the profits of companies still promises higher returns than savings bonds. It just needs to be clear that this money is not needed at a specific time – for example, now.

*Editor’s note: The DAX is a blue chip stock market index consisting of 30 major German companies trading on the Frankfurt Stock Exchange.