Yield driver for the investment result

“It's the return that counts, not the costs” is an argument often heard when investors frown at the high fees charged for investing in securities. The argument is basically correct, but we would like to point out that the (high) fees are guaranteed to be incurred, while the promised additional return may be generated in the future. This is because – as is always stated in the small print – promised returns offer no guarantee of actually realized returns.

We have known which factors – in addition to the cost burden – the net return achieved depends on at the latest since Messrs Brinson/Hood/Beebower examined the return drivers for the portfolio performance achieved in a series of specialist articles in 1986. They came to the conclusion that between 80 and 90% of the return depends on the chosen investment strategy (= choice and long-term weighting of asset classes) and only 10% to 20% on the investment tactics (= temporary overweighting and underweighting of asset classes) and the investment selection (= security weighting within the individual asset classes).

As an investor, you can therefore focus firstly on choosing a suitable investment strategy and secondly on its cost-efficient implementation. An investment strategy is suitable if it is tailored to the investor's risk capacity and risk appetite.

When choosing an investment strategy, the decisive factor is primarily how the ratio of real assets (equities and real estate) versus nominal assets (bonds and cash) is selected in the long term. As a rule, the higher the proportion of real assets, the higher the long-term return, but also the greater the temporary fluctuations in returns and therefore the higher the risk. At a downstream level, the regional allocation and the question of currency allocation and hedging must be addressed. We will address these allocation issues in future Economico Flashes.

The Economico comparison portal offers you as an investor the opportunity to choose between 5 standard strategies with a global and Swiss focus. If you know how your investment strategy should be structured in concrete terms, you also have the option of selecting and weighting the asset classes individually and thus carrying out a comparison of offers for your desired investment strategy.