How are the sovereign wealth funds of the world developing?
InvestmentInvest like the Norwegian sovereign wealth fund
The Norwegian sovereign wealth fund, which is worth over 800 billion euros, has achieved a better average return than the Dax since 1998 - and with less risk! One record after another is being broken by the Norwegian oil fund. After crossing the $ 1 trillion mark for the first time last autumn, the state investment vehicle has now invested more than 160,000 euros per Norwegian in the international financial markets. Last year, the fund generated a return of 13.7 percent - and once again beat the Dax.
These are great numbers that mean that Norwegians can look to the future much more relaxed than we Germans and residents of many other European countries.
But everyone can benefit from Norway. Because if you don't have a rich government to provide for you, you can take it easy and imitate the strategy of the Norwegian oil fund.
What the thanks of clever politicians (and voters who vote for them) have achieved on a social level, each individual can and should also achieve for themselves: build solid assets in order to be better equipped for the future. That sounds complicated, but it's not that difficult - with the oil fund as a model! Although it is the largest sovereign wealth fund in the world, it is pursuing a strategy that private investors can also imitate, even if they can or only want to invest 50 or a few hundred euros per month.
Why take the oil fund as a model? Quite simply: it is successful and low-risk. In the past 20 years, it has grown by 6 percent on average, more than the Dax. During this time, the performance of the oil fund fluctuated less, so it invested its money more securely.
Despite the size difference in the portfolio, private investors and funds are similar. It's both about that
- build up long-term wealth,
- save a manageable sum per person per month,
- to remain flexible, i.e. to take a break from saving if necessary,
- to keep the risk low,
- invest in markets open to everyone.
In addition, the issue of sustainability plays an increasing role when private individuals invest their money and the oil fund has long tried to invest as ethically as possible.
If you take this as a model, you can achieve a comfortable cushion in the long term with little financial and time investment. At the same time, attention is paid to sustainability because not all companies are invested in.
To do this, you just have to follow the basic rules that can be derived from the Norwegian Oil Fund. It's easier than you might think.
After many years of reporting on the oil fund for media like Financial Times Germany and Die Welt and praising its strategy, I worked out a blue print for private investors from its strategy for my book “So you get rich like Norway”.
The essential political guidelines that the oil fund must adhere to and that represent the overarching strategy can be poured into a few rules that should also apply to private investors. The most important are:
Investments must be made continuously and on a long-term basis, depending on one's own economic situation; the current market situation must not play a role.
The risk preference determines which proportion goes into (riskier) stocks and which into (safer) bonds.
The risk should remain more or less stable, which is why a reallocation is made if one asset class has developed significantly differently than the other over a longer period of time.
Strict cost control is exercised in order to increase the return.
Financial market experts recognize that this is where aspects of modern portfolio theory shine through. Nevertheless, the fund goes its own way. Last but not least, this includes paying attention to the most ethical investment possible and not making money available to certain companies. In addition, his approach is easier to understand and imitate than complicated financial market theory.
Nevertheless, there are a few points that the Norwegians shouldn't copy, including the live ticker on www.nbim.no. To be able to really watch for a second how assets go down or down is exciting, but counterproductive with long-term investments because it distracts from the essentials. As with the Bundesliga, the intermittent ups and downs are irrelevant as long as the final score is correct.
The idea of establishing the oil fund cannot be praised enough. Now is the time for everyone to build their own small oil fund.
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