From saving to investing: The right approach to long-term wealth creation

Making the shift from saver to investor requires a fundamental change in mindset. Many people cling to traditional savings methods because they associate investing with high risks. However, sustainable long-term wealth creation is only possible through targeted investments and a well-thought-out strategy.

A key obstacle is loss aversion – the psychological phenomenon where losses are felt more acutely than gains. This often leads investors to avoid potential opportunities and make poor decisions out of fear of market fluctuations.

To invest successfully, it is essential to manage one’s emotions and maintain a long-term perspective. Those who are not unsettled by short-term market movements and invest with a structured plan can benefit from stable returns over time.

To illustrate the long-term advantages of a well-considered investment strategy, let’s look at the historic performance of CHF cash, Swiss government bonds, and Swiss equities over an extended period. Liquidity in the form of cash or short-term deposits offers security and flexibility, but little return. Swiss government bonds are considered a very safe investment, providing more security than equities, but the returns are limited and often insufficient to build significant wealth over time. Equities, on the other hand, are much more volatile, with significant fluctuations including sharp drawdowns in times of crisis. Yet those who ride out these setbacks and do not sell their positions in panic can reap substantial long-term rewards.

This analysis clearly shows that investors who avoid emotional reactions in times of crisis fare significantly better in the long run. Loss aversion may cause investors to sell in turbulent times, thereby missing potential recoveries. A structured, long-term strategy based on diversification and patience enables investors to benefit from the stable returns of the financial markets and build wealth over time.