There are many things you can do with your savings, including investing. But how should you start investing, why should you do this, and what should you pay attention to?
Before you start investing, it is important to read enough information about investing and everything that comes with it. For example, when is the best time to start investing, and when should you wait before investing your savings?
Here’s everything you need to know before you start investing.
More about investing
What exactly is investing? This is a form of investment where your money is recorded to make financial progress in the future. Investing means that you invest (part of) your savings in a company; in return, you get a share in this company, and you are a co-owner in the economic field.
The company uses your money to achieve certain goals. As an investor, you often receive a dividend, a portion of the profit achieved with your investment. There are different investment methods that you can choose as a novice investor.
Why starting investing is an attractive option.
You may be wondering what the point is of investing if you have your money safely in your savings account. But that is exactly why investing is so attractive.
By doing something with your money, you have the chance to make more money. If you do nothing with the money in your savings account, nothing will happen with it, and you only pay interest on it. There are various reasons for investing, such as increasing your capital, paying off the mortgage, or being assured of an ample retirement provision. So there is a lot to be gained when you start investing.
Investing is for everyone.
You don’t just have to start investing when you are a certain age. Anyone who can spare an extra monthly amount for a longer period (about 10 years) is suitable for investing.
It is possible to trade in securities from the age of 18. You can only get back the money you invest in investments by selling shares. This is not recommended because you pay extra money for transactions and because getting money back earlier significantly lowers your chance of high returns. Have you saved a large buffer? Then you can start investing.
Points to consider when starting to invest
What do you need to know about investing? Before you start investing, it is important to pay attention to several things when buying or selling shares and choosing an investment form. For example, it is important to know where you invest your money:
- You can choose from numerous brands or products that apparently run well. Immerse yourself in a particular market so that you know where you are investing your money. With limited knowledge, you run the risk of losing your money more quickly. You should, therefore, always invest in companies or brands that you know about.
- Another point that you should not lose sight of is that there are always extra costs involved. The broker, also known as the exchange trader, charges fees for buying and selling shares. View and compare different brokers so you can see how much these transactions cost.
- It is also important to keep in mind that the past does not say anything about the future. When a company has raised a lot of money in the past, it is attractive to investors. Nevertheless, these returns do not say anything about the returns in the future.
As a novice investor, it is good to know what risks you will face when you invest. You can opt for stability and security, but also long-term returns. You can trade in stocks in the short and long term; it is important to determine how many shares or bonds you want to have and the most attractive.
It is good to know that your savings are also at risk when it is in the bank. Starting investing is, therefore, an ideal step to protect and increase your assets.
How do you start? Choosing an investment form
One of the first steps you take is choosing an investment form. There are different ways of investing, and it is up to you to decide which is the most attractive.
When you want to start investing, you can choose many different types of investment. But how do you determine what suits you well? For this, you look at several things:
- The spending goal: what do you want to use your capital for? Is it a form of leisure activity, or do you want to invest in creating a pension?
- Investment room: how much risk you can take depends on how much time there is between the moment you start investing and the moment you need this money again.
- Deposit amount: the more money you have to spend, the better you can absorb a possible setback.
- Risk: how do you deal with setbacks in your investments? The more you accept any risks, the more risk you can take.
Different types of investment
You can choose to invest in stocks, bonds, crypto options, and real estate; you can also opt for future and turbo as investment options. Shares are the best-known form of investing: you pay for shares within a company in exchange for control or dividend. You can also opt for bonds.
You lend money to a government institution or company; in exchange for the investment, you receive interest on the amount you borrow. Are you going to start investing? Many other novice investors choose equities as a form of investment.
Another option is the mutual fund. This is a gathering point of investors where all the money comes together and forms fund assets. You make a small investment in thousands of companies: if you want to start investing, this is a good start. You can choose from stock funds, bond funds, and a mix of the two. Another new and good start for beginner investors is investing in crypto coins such as Bitcoin, Ripple, or Ethereum.
How do you start? Choose a broker
When you start investing, you first need the money that you can invest. But it would help if you also had a broker. You can think of a broker as a stock exchange trader, an online bank that helps you invest your money. How do you know which broker is best for you? To determine this, it is best to compare brokers with each other.
You pay different transaction costs per broker, and not all brokers have the same options. As a novice investor, it is good to start with a broker where you pay low registration and transaction costs. There are also brokers where you can practice before you start with the real work.
Create an account and determine the amount
The next step is to create an account with the broker you have chosen. Before you can start investing, you need an account. There are brokers where you can register for free. Then indicate whether you want to invest personally or for business and fill in all your details. You must also be able to identify yourself, so you must always provide your real name.
Then you determine how much money you are going to deposit into your account. Sometimes the minimum is € 100, and in some cases, this is higher, or there is no minimum amount.
Always make sure you choose an amount that you can spare for a longer period of time. You cannot just get back the money you invest; it is important to think carefully about the amount you want to invest.
Determine the term
Finally, you will determine the term of your investment. The shorter the term, the greater the chance that you will not make up for any setbacks. On the other hand, a longer-term means you have to miss your money for a long time. If you can miss the money for a long time, a long term is certainly advisable. When you need the invested money again within a few years, it is not smart to invest.
Starting to invest is especially attractive when you can miss your money for a long time. The big advantage of this is that the return is often much higher after a longer period of time.
The right time to start investing
You are probably wondering, when is the right time to start investing? When you choose shares as an investment form, the moment of starting is of great importance. Of course, you want to buy the shares cheaply and sell them again with as much profit as possible. In this case, it is best to wait to buy until the stock price has fallen.
When your price is at a high, you better wait with it. There are also investment options where you can start today. This is because the stock market can not be predicted, and you never know what will come next. So when you start investing depends on the investment form you choose.
What will you earn by investing?
It is difficult to say in advance what exactly the investment will yield you. Often the following applies the more risky the investment, the higher the return. So you have to bet more to earn more interest. But this automatically also means that you can lose more. Also, you often make more profit when you invest in the long term. You can then make up to 8% profit on the money you have invested.
It is, therefore, certainly advisable to opt for long-term investment because you will achieve better results. In any case, it is more valuable than leaving your money in your bank account without doing anything with it. By investing your savings, you have a goal in mind, and you can achieve a high return!
What not to do with investing
Do you want to start investing in shares, bonds, real estate, or another financial product? There are several things you have to take into account. For example, it is always not recommended to invest with borrowed money. This increases the risks, and you can eventually end up in debt when the stock market prices fall.
Also, it is not smart to invest in something you do not know. A brand or company that is doing very well seems attractive to invest in. But if you don’t know anything about this market, it won’t help you much, and you can still face losses.
Therefore, it is important to always invest in something that you know or have done enough research. Finally, it is not recommended to invest if you do not have extra money to spend.
Starting to invest is especially interesting when you have enough money (for example, in your savings account), and you can miss some of it for a longer period of time.
Invest with your savings
If you are looking to achieve a higher return than on your savings account, investing is an ideal solution. The return on a savings account is insignificant compared to the return you can achieve on the stock market, for example. When you also invest money that you can spare, it is also less bad if you have to deal with setbacks.
In this way, you continue to invest responsibly. Of course, putting your money away in a savings account is a good way, but you get dividends on the stock market, among other things. This can be a nice extra income if this amount is paid out several times a year.