Investing begins in the mind.
Text: Noëmi Kern
Many people are nervous about putting their capital in financial assets. But not investing also comes with risks. The economist Jacqueline Henn specializes in financial market theory. Her aim is to help people become more financially literate. She explains what to consider when investing, and the role that time plays.
Why should people invest?
Money sitting in an account doesn’t grow, since interest rates are practically zero. On the contrary, there’s actually a risk that you’ll make a loss due to inflation, because the purchasing power decreases.
When’s the best time to start?
Consistency is key, not a specific point in time. With regular investing, fluctuations balance out over time.
What’s the biggest risk with investments?
Stocks, in particular, fluctuate widely. When markets fall, perseverance is required. Historically, these riskier asset classes have delivered higher long-term returns — in other words, more money.
How can the risk of losses be minimized?
Through diversification — that is, a broad spread of investments — and a long investment horizon. With a time horizon of at least 10 years, the probability of avoiding losses on stock investments is very high. The last 10-year period with a negative yield in Switzerland ended in 1940. Additionally, investors can benefit from the compound interest effect.
How does this work?
Compound interest refers to the exponential growth of invested capital, in which the returns are reinvested and therefore also generate returns themselves. An easy way to understand this is the Rule of 72. If you divide the number 72 by the interest rate, it gives you the number of years it will take for the money invested to double. In the past 100 years, the average yield on the Swiss stock market was just under eight percent. This means it would take nine years for 1,000 francs to become 2,000 francs. After a further nine years, this would become 4,000, then 8,000, and so on. The reverse is also true: With inflation at two percent, the purchasing power of 1,000 francs after 36 years will only be equivalent to that of 500 francs in today’s money. As long as the yield is higher than inflation, the investment will ultimately return a profit in real terms.
Which investment is right for me?
This depends on your personal plans and preferences. For those with a long investment horizon, stocks have been a better choice over the last 100 years than an investment in bonds or even a savings account. Those who need the money in a year’s time should leave it in a savings account or invest it in fixed-term deposits or bonds — that is, loans to states and corporations — that mature in one year. Risk-averse investors should also avoid investing everything in stocks and instead opt for a combination of stocks and bonds.
Which stocks should I choose?
For the “average” investor, index funds — such as exchange traded funds (ETFs) — are a good option. As these reflect the development of whole markets or sectors, they’re already broadly diversified in themselves. Fluctuations are therefore smaller than with individual stocks, and the fees are low. These funds are referred to as passive investments. Empirical analyses show that index funds tend to perform better in the long term than actively managed funds, which also often have higher costs.
What mistakes is it important to avoid?
You should not sell immediately when prices fall. It’s also important to pay attention to the fees, because they reduce the returns. The key figure here is the total expense ratio (TER), which all funds are required to disclose. This figure indicates what percentage of the money invested is deducted annually as fees. There’s also a risk of losing money if you overestimate your own abilities and think you can beat the market by attempting to make high profits through investments in individual stocks.
How do people make decisions about financial matters?
Daniel Grosshans reveals where inner obstacles to investing originate and what can help people. As a researcher at the Faculty of Psychology, he focuses on how economic decisions are made and is particularly interested in how humans behave in relation to investments.
What stops people from investing their money?
People attach greater importance to the immediate present than the uncertain future. This pattern of thought is the obstacle that stops many people from starting things in the first place. Although most people know it would be sensible to invest, they would rather start tomorrow than today — because they want to look at it in more detail first.
How much prior knowledge do you need to get started?
Those who want to gain a detailed understanding of how everything works so that they can find the best possible product are standing in their own way. There’s actually no need for such in-depth knowledge. From an academic perspective, there are pragmatic solutions such as index funds that reflect the market movement of a wide range of stocks. These are so broadly diversified that it doesn’t particularly matter whether it’s the perfect mix right now. You can also change the portfolio mix further down the line.
Why are people so afraid of making a loss?
People tend to attach too much weight to small probabilities, particularly those with negative consequences. This leads to a psychological bias. Of course, there’s always the possibility of the market suddenly collapsing. If we look back at the history of stock market trading, however, crashes are very rare — and the market recovers in the medium to long term.
How can people overcome these psychological obstacles?
From a behavioral economics perspective, risks can be taken in a rational or irrational manner. It’s okay to treat things with respect and to proceed with caution at first. Investment isn’t an “all-or-nothing” decision — there are various options with different levels of risk, so everyone can choose something that suits them. The first thing to consider is what reserve you should keep in your account to cover planned and unplanned expenses. That provides you with certainty. The size of this reserve should be based on your life situation and lifestyle. In principle, you can invest everything beyond that cushion — either through the bank or through an online broker via an app, depending on what you prefer.
What’s the first step?
Start with 100 francs and see what it’s like to actually buy a share or an ETF. The next day, you sell it all again, whether you’ve made a profit or a loss. By doing so, you can familiarize yourself with the mechanisms and see that the money you’ve invested isn’t simply gone — it’s back in your account in no time. Everything is probably much easier than you thought. As a general rule, however, it’s best to choose the longest possible investment horizon.
More articles in this issue of UNI NOVA (May 2026).