Dax 40: Don’t be afraid of new all-time highs!

Last Updated: 8. Dezember 2023By

This week, the German leading index DAX has reached a new all-time high. New record levels for the DAX and other indices are seen by many investors with mixed feelings. Are the price increases a sign of a sustainable uptrend that should be participated in? Or is an all-time high rather a sign that a reversal of trend or even a crash is imminent? Many private investors, who are new to the market, only think short-term and pull out at the first failures to wait for „better times“.

In my opinion, this is a gross error! Obviously, the search for the „right“ entry into the securities market is often given up prematurely without results. The following figures show that the search for the right entry point – at least for long-term oriented investors – is overestimated.

All-time highs are the rule, not the exception I would like to illustrate to you with an example that all-time highs are the rule and crash phases the exception. Don’t you believe my thesis? Then you should read the following lines. Since its founding 35 years ago, the DAX has yielded an average return of 8% per year (including dividends).

In the USA, where the first stock indices were calculated more than 100 years ago, we can see that stocks yield around 8% per year over very long periods of time. Thus, the Dow Jones Index, probably the most famous stock index in the world, has risen from about 40 to more than 36,000 points since its founding.

Despite the many crises and crash phases, the German leading index DAX has risen from 1000 to currently around 16,500 points. I hope that, based on these figures, it is clear to you that, if you invest for the long term, the timing is not so important. Stocks go up in the long term – you just have to be there.

The simple experience value applies: If you don’t have the stocks when they fall, you don’t have them when they rise! Who among us would have expected a new all-time high in December just a few weeks ago in the „stock market horror month“ October?

Stock market cycles are your friend – use them for your investment success One way to use stock market cycles for your own investment success is the „cost-averaging effect“. Thanks to the cost-averaging effect, investors are not dependent on the whims of the market.

It is based on a simple logic: If you invest the same amount in stocks or funds every month (or every quarter), you are automatically acting counter-cyclically. If prices fall, you get more shares or fund units for your fixed savings rate. It’s the other way around when prices rise.

In this way, you pay on average a lower purchase price. With this simple strategy, you avoid the psychological traps of „fear“ and „greed“ in the stock market and slowly and systematically build up a larger fortune.