The real risk of investing is not price fluctuations – on the contrary

No, he doesn't want to take such a big risk, says my friend. We're talking about saving for stocks, and I've just advocated for a maximum share of stocks. The man, in his early fifties, wants to put money aside for his retirement.

I argue that in his situation, the greatest risk isn't price fluctuations, but rather a misguided caution. Because it inevitably leads to lower returns. I'm not getting anywhere.

Like most people in Switzerland, the person has the majority of their assets in their pension fund, which, he says, credits them with 2 to 3 percent annual interest on their retirement savings. This is a bond-like return that, at best, maintains purchasing power. Adjusted for inflation, nothing is gained.

My friend's third pillar is partly in an account and partly in a mixed equity-bond fund at his bank. This combination will also yield him a return of 2 to 3 percent at most.

What a gigantic waste of resources! It's like heating your home with the window open. But few people understand this. This is partly due to the fact that their bank or some "financial influencers" keep telling them that stocks are risky because the market fluctuates so much.

However, price fluctuations are a very poor risk measure for long-term investors. Volatility isn't dangerous for them; on the contrary, it indicates lucrative assets. Even within the equity universe, small caps or technology stocks, whose prices fluctuate more than other segments of the stock market, tend to yield higher returns.

The greatest risk for working people in Europe is old-age poverty. In Switzerland, where public finances are more solid and pension provision is based on multiple pillars, this risk is fortunately much smaller—but it will also increase here, parallel to life expectancy.

In our neighboring countries, however, things could end badly for many. Most citizens rely on the unfunded pension promises of an increasingly over-indebted state. In the best-case scenario, these people still own their own homes and have a few tens of thousands of euros in a bank account.

That feels much safer than a rollercoaster ride on the stock markets, which twitch wildly with every announcement from Donald Trump. But the stock market month of May has shown once again that it doesn't really matter who sits in the White House.

The S&P 500 recorded a gain of 6 percent—that's twice the annual interest my friend receives from his pension fund. However, many investors missed out on this development because they had exited the stock market in the weeks prior.

Of course, the next setback is sure to come, the next crazy idea from the White House. But what Trump does and says is completely meaningless to a long-term, globally diversified investor. Even if Trump's friend Putin were to start a new war, it wouldn't matter. By the time my friend retires, Putin and Trump may already be buried and crumble to dust.

I'm a fan of volatility. I'm rather suspicious of the promises of the private equity industry, which sells the advantage of its privately held investments being volatile. However, this illiquidity creates a false impression of stability that doesn't exist. Private equity providers also usually charge absurdly high fees for their services.

I'm also a proponent of adding Bitcoin and a handful of smaller cryptocurrencies to your mix. They fluctuate even more wildly than stocks. But Bitcoin is the best-performing asset of all—regardless of the fact that every few years it experiences a stomach-churning downturn. This downturn isn't dangerous. Not participating is the risk.