How to get more out of your money in 2024

The year 2023 was not a joyous one for investors. Most recently, the Swiss share index SMI was barely above the level of the crisis-plagued year of 2022. What’s going on?

Sacha Marienberg says the weak performance is primarily due to special factors. The SMI is currently being weighed down by price drops at Nestlé and Roche. Without these two stocks, the SMI would be up significantly. In general, it was not a bad year for global equity markets.

So there’s no reason to be put off investing in the stock market? 

No. If you want to build up long-term assets, you should definitely invest in shares, for example with a fund savings plan.

What’s important to know?

In addition to a long investment horizon, it is important to diversify your investments as widely as possible instead of focusing everything on one company or sector. I also recommend staggered investments. This allows investors to better balance out fluctuations on the stock market.

Will share prices rise again in 2024?

This primarily depends on the economy and interest rate trends. As things stand today, we assume that central banks will cut key interest rates for the first time in the second half of the year, provided that global inflation has come to an end by then. Although we do not expect a recession in Switzerland, we do anticipate a slowdown in economic growth. However, the picture should brighten considerably over the course of the year.

What advice would you give investors?

You should focus on quality stocks. These are shares in companies with a solid business model and low debt, that is, companies that generate good earnings regardless of the economic situation.

Which ones, for instance?

For starters, large pharmaceutical companies such as Roche. This sector is considered to be resistant to economic cycles and is one of the most important pillars of the Swiss economy. And then there are tech companies such as Nvidia, Microsoft and Google. The recent boom in artificial intelligence is set to continue, and the aforementioned stocks are likely to benefit from this.

How much will the wars in Ukraine and the Middle East affect the financial markets next year?

Experience shows that regional conflicts have no lasting impact on the stock market. Short-term dips, such as at the beginning of the Russian war of aggression against Ukraine, are always possible, but then the stock markets recover relatively quickly.

What types of investments are particularly interesting in the current environment?

Stocks remain the most important components for wealth accumulation. Bonds are also recommended to broaden your own investment portfolio – but only as a supplement. They are not an alternative to stocks, even if bonds are likely to benefit from lower interest rates next year.

And what about gold?

In a fluctuating market environment, it can help balance the risks in your portfolio in the short term. But in the long term, gold has no strategic quality because it does not yield any returns.

Fixed-term deposits continue to attract higher interest rates on savings than before – are they a good idea?

Absolutely. This allows you to invest your money safely and sometimes even with attractive returns. Unfortunately, many people leave their money in their payroll account, where there is hardly any interest. In this respect, I advise bank customers to shift their savings into savings accounts or fixed-term deposits. However, fixed-term deposits should be supplemented with equities to build up assets.

Switzerland was far less affected by inflation than its neighbours. Nevertheless, 2024 is likely to be more expensive for the average Swiss consumer, isn’t it?

Yes, that’s true. Health insurance premiums are rising, as are VAT and electricity prices in most municipalities. In addition, a further increase in rents is expected in April because the reference interest rate was raised for the second time at the beginning of December, this time from 1.5 to 1.75 per cent. However, this should be the peak for the time being.

For mortgage interest rates too?

Yes, we assume that mortgage interest rates have peaked and will fall further next year. Home financing is therefore likely to become more affordable again.

Can you explain this with an example?

While the cost of a ten-year mortgage was still over three per cent at the beginning of the year, it is currently close to 2.5 per cent. In anticipation of lower key interest rates, the ten-year is likely to move towards two per cent.

Which mortgage makes more sense in this market environment: a fixed-rate or a SARON mortgage?

That depends on how much risk you want to take. If you are looking for financial predictability, you are better off with a fixed-rate mortgage. If you can handle uncertainty on the interest rate market, have sufficient financial reserves and expect interest rates to fall, you can opt for a money market mortgage such as a SARON-linked mortgage.

In your experience, is there any stock market wisdom that has stood the test of time?

The higher the proportion of equities in the portfolio, the higher the return in the long term. The risks, i.e. higher price fluctuations, are rewarded by the market – provided the investments are broadly diversified.

The expert

Sacha Marienberg, Head of the Investment Office at Migros Bank