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What Investors Can Learn From Italy’s Winning Football Team

15 July 2021

 

When Italy won the UEFA European Championship last Sunday night, the pundits put it down to great skill, experience, and above all, meticulous planning.

Investors have much to learn from Italy’s celebrated manager, Roberto Mancini. If they, too, have a clear plan for investing over time, then success could come far more easily.

It all begins with putting aside money from your regular income. Nibud (the Dutch National Institute for Family Finance Information) says that putting aside 10% of your net salary every month is an appropriate amount. From this, it’s often said and we believe that one needs three to five months’ expenses in a savings account to build a buffer against unexpected financial difficulties. The rest can be used for investing.

Set your targets

Then you can begin to plan for investing, putting money aside for five to 10 years – preferably even longer – that it may take for an investment to bear fruit. Set your targets at the beginning. Decide how much money you need to accumulate and over what period. By making assumptions about the likely annual return of your chosen investment, you can calculate how much you need to invest to reach that target.

Understand risk

When it comes to risk and the way you deal with it as a person, many funds and ETFs have risk scores on a scale of one to seven that provide a starting point. However, these rough and ready guides are based on the volatility of an investment’s price – how much it moves up and down. That matters in the short term, but over the long term, volatile investments could offer the best returns. The beauty of a long-term investment horizon is that it may reduce volatility. So, there is a relationship between risk (defined as volatility) and time – the more time you have, the more risk you can handle. (To return to football, the best players are often temperamental!). And investing is really for the long term – the five to 10 years referred to above (see graph for potential returns).

Return of investing EUR 100 in the VanEck Multi-Asset Growth Allocation UCITS ETF

Return of investing EUR 100 in the VanEck Multi-Asset Growth Allocation UCITS ETF

Source: VanEck. Data for the period 14/12/2009 – 30/6/2021. Past performance is not a reliable indicator for future performance.

Test your psychology

Perhaps, most importantly, test your psychology – just as Mancini’s men must have done for the Euros. Do a worst-case scenario analysis: how would you respond if the stock market crashed? In football terms: How do you react if you are 2-0 behind? How do you deal with the pressure of penalties? Do you have enough discipline to stick to the plan? When markets fall, you need to recall that previous setbacks have always been followed by recovery. Realize that a loss is only crystallised if you sell; then the chance of recovery is gone. If you feel uncomfortable with too much risk, you can opt for a conservative ETF with a high proportion of low-risk bonds.

But also, what happens if things go very well in the stock market? Don't get overconfident (as did the Dutch team in the 1974 World Finals against Germany – which they lost) or too excited; don't deviate from the plan by investing more or cashing in profits.

There are other types of risk that are best avoided over all time frames. These are leverage – i.e., investing with borrowed money – and investment products that include some form of counterparty risk.

So, save for short-term setbacks first. Then invest for the long term, using investment products such as ETFs, where time actually reduces the risk. Learn from Mancini and plan for a potential victory.

VanEck Asset Management B.V., the management company of VanEck Multi-Asset Growth Allocation UCITS ETF (the "ETF"), a sub-fund of VanEck ETFs N.V., is a UCITS management company incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). The ETF is registered with the AFM and tracks a combination of bond and equity indices. The value of the ETF’s assets may fluctuate heavily as a result of the investment strategy. If the underlying index falls in value, the ETF will also lose value.

Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the local information agents.

Performance quoted represents past performance. Current performance may be lower or higher than average annual returns shown. Discrete performance shows 12 month performance to the most recent Quarter end for each of the last 5yrs where available. E.g. '1st year' shows the most recent of these 12-month periods and '2nd year' shows the previous 12 month period and so on.

The Dutch domiciled ETFs use a gross reinvestment index as opposed to many other ETFs and investment funds that use a net reinvestment index. Comparing with a gross reinvestment index is the purest form since it considers that Dutch investors can reclaim the dividend tax withheld. Please note that the performance includes income distributions gross of Dutch withholding tax because Dutch investors receive a refund of the 15% Dutch withholding tax levied. Different investor types and investors from other jurisdictions may not be able to achieve the same level of performance due to their tax status and local tax rules.

Important Disclosure

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

This information originates from VanEck Switzerland AG which has been appointed as distributor of VanEck products in Switzerland by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck Switzerland AG’s registered address is at Genferstrasse 21, 8002 Zürich, Switzerland.

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