Munich. Investing with stocks and bonds seems so complicated to many people that they don't even start. This is supported by figures from the German Stock Institute, according to which only about one in six Germans owns shares either directly or through funds.
According to Martin Weber, this fear of the threshold is unfounded and can take revenge. The financial scientist has researched the behavior of investors for decades and in this interview gives tips on how beginners and advanced investors can build their portfolios.
Mr. Weber, can every investor set up their own securities portfolio?
Martin Weber: That depends entirely on what you want and how much previous training you have. But the most important thing is that you invest at all.
Many people have a certain fear of investing their money in the capital market. Who can help you cross this threshold?
Finding a good bank advisor who doesn't just want to sell you his bank's products is certainly a challenge. Fee-based consultants are perhaps the better choice because they provide much more independent advice. But there is also a lot of research that shows that it can also be incredibly helpful if there are people in your circle of friends and acquaintances who can explain the basics of investing and perhaps give you a tip or two.
Assuming I want to keep things simple as an investor, would there be something like the Portfolio for Dummies?
As part of our research, we have repeatedly found that a portfolio that consists of two-thirds stocks and one-third bonds can be a good start.
Isn't that all you need?
Such a combination should be enough for now. If you want, you can also integrate raw materials or real estate, but then it becomes more complicated and you need more expertise and have to invest more time, which many people don't have or don't want to spend.
Two thirds stocks and one third bonds may sound quite offensive to some people.
I agree with you. And so we come to a central question that we haven't answered yet: the investment goal. A 30-year-old who wants to buy a sports car at 40 will invest very differently than a pensioner who is saving money for her grandchildren. The time I have to invest largely determines the risk I can take.
So does that mean rules like equity quota is equal to 100 minus age are meaningless?
Not necessarily, if I have the goal of saving just for myself and want to use up my money until the end of my life, this rule can make sense. So-called life cycle funds, which are very popular in the USA, do exactly that. Ultimately, the equity allocation should depend on your own risk attitude. So the time I have to invest and whether I feel comfortable with the portfolio. Anyone who is worried about fluctuating prices should have fewer shares than someone who is unaffected by the ups and downs on the stock market.
There are many professional investors whose portfolios include very few different securities. Charlie Munger, Warren Buffett's investment partner, who died in 2023, is said to have only had three positions in his portfolio. On the other hand, experts like you advise diversifying as widely as possible. Now who is right?
Both sides. If I am absolutely convinced of an individual share and also know the company, i.e. have an information advantage, then I can buy this share and make it the central part of my portfolio. At the end of the day, it's always about having better information than the rest of the market participants. But hand on heart: you and I and almost all fund managers will not have this information. It therefore makes more sense to spread the invested money as widely as possible.
Will an exchange-traded index fund (ETF) based on the MSCI World stock index be enough for me?
Absolutely not. Apart from the fact that with an ETF on this index you actually only invest in US stocks, the emerging markets are also missing from the MSCI World...
...but these are markets that have done rather poorly over the past ten years.
That may be true, but in 2015 would you have bet that it would actually happen?
Rather not.
That's exactly the problem. As investors, we always have two perspectives: Ex post, i.e. in hindsight, we are all wiser and know which stocks and markets did well and which did not. Ex ante, i.e. beforehand, we were all equally stupid and didn't know who would win the race in the end.
Does this also mean that it is pointless to look for the best funds or stocks?
I would put it more positively: It is completely sufficient if you invest with the market. This way you can build wealth in the long term and without much stress.
Stress is a good keyword. There was a real price collapse at the beginning of April 2025, which startled many investors. What should they do in such a situation?
This again depends on your investment goal. If they don't need their money for 20 or 30 years, they can calmly accept price fluctuations like the ones we saw last month. To get this calm, it helps if you focus on your goal and stick to the strategy.
That means?
Don't get hectic and sell securities just because many others are doing it.
Vita Martin Weber
Born in Stuttgart, he studied mathematics and business administration and received his doctorate at RWTH Aachen. After professorships in Cologne and Kiel and research stays at Stanford University, the Wharton School and other US universities, he came to the University of Mannheim, where he conducted more research into investor behavior. The now 74-year-old is also a senior professor and advocates for more financial education.
Martin Weber is one of the first German scientists to study behavioral finance, i.e. questions like: “Why is there a herd instinct on the stock market?” and “How does panic arise in the market?” argued. In 2008, he developed Arero, a fund that invests in stocks, bonds and raw materials using ETFs and is intended to be a basic investment for everyone. Weber has since withdrawn from the fund as an advisor.
Let's go back to the topic of diversification. Is there an upper limit beyond which it makes no sense to diversify even more widely?
Unless you are the Norwegian sovereign wealth fund, it is enough if you have stocks and bonds or shares and fixed-term deposits or overnight money. When it comes to stocks, it is important to use one or more ETFs to represent the established markets and also the emerging markets. Whether you also buy ETFs that track the developments of medium-sized and small companies is a matter of taste. Just as, according to our research, in the long term it is a question of taste whether one should rely on corporate bonds or rather on government bonds, which are denominated in euros and therefore have no exchange rate risk.
For whom is it worthwhile to combine stocks with overnight money and fixed-term deposits?
Such classic savings accounts are simply more predictable. On the one hand, bonds are fixed-interest securities, but on the other hand their prices fluctuate. This is not for everyone. In addition, if you have US dollar bonds in your portfolio, currency fluctuations can quickly thwart your plans.
Who can have 100 percent stocks in their portfolio?
Anyone and everyone whose goals it suits. As previously stated, the more time you have, the higher your risk may be. The pensioner I mentioned earlier can also tolerate 100 percent stocks as long as she invests the money for her grandchildren.
In your opinion, are there situations in which actively managed funds make more sense than ETFs that automatically track an index?
That brings us back to information. If a fund manager truly has information that no one else has, his fund can be worthwhile. But do you know which fund manager is the lucky one? Information also costs money. There are quite a few actively managed funds that manage to beat the market before costs, but after costs the world looks different again.
