Would you like to make more money with your money? In that case, do not leave them lying in a bank account. It’s the same whether the extra money is a big or a small amount – if you don’t invest it, it won’t produce anything either.
Starting investing is often limited to familiar reasons: investing is perceived as cumbersome and risky, and stock quotes as impossible in Hebrew. However, you don’t need a degree in economics to get your capital to produce. We’ll tell you the tips put together in this article to help you get started investing today.
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Why you should invest?
Saving is a smart way to take care of your own finances. In the long run, however, time will be the worst enemy of your savings, as the interest rate paid on your money is currently zero. At the same time, prices will continue to rise with inflation.
However, with a sensible investment strategy, you can inject your euro to give birth to more euros. And best of all, these extra euros will also give birth to more euros. It is this interest-bearing snowball phenomenon that makes long-term investing productive, also known as compound interest.
The best time to invest is now
When should you start investing? While the right answer is yesterday, it is not too late today either.
In practice, the right time to invest is when your economy has reached a solid foundation. As we said earlier, you don’t need gigantic assets or top income. Of course, there is no harm in that either, but the most important thing is that you can put aside even small amounts of genuinely extra money.
Investing makes sense when you know you won’t need the capital you invested in the short term. If you have to finance your investment at a bad time when the washing machine breaks down, you could make big losses. History shows that time is on the investor’s side. Prices are guaranteed to rise and fall from time to time, but in the long run, investments will still be on the plus side.
You don´t need big capital to start invest
Many people think that investing is just the job of rich people. In reality, both low- and high-income people benefit equally from investing. If you can’t start investing with large start-up capital, you might as well invest small amounts on a monthly basis. The most important factor in a profitable investment is time.
The claim can be verified using counters available online. For example, if you invest € 150 a month in a 6% annual return, you will have almost € 25,000 in stock in 10 years. If you had deposited that amount in a savings account, you would have been almost € 7,000 poorer.
The effect grows the earlier you start investing. If you start transferring EUR 50 per month to the same investment at the age of 20, you already have a pot of EUR 100,000 at retirement age.
Where to invest in 2020?
Stocks, mutual funds, bonds… Where should I invest right now? Unfortunately, it is impossible to give universal advice on the best investment targets, as the choice of investment target is the sum of many things.
Choosing the right item is influenced by, for example:
- Time horizon: how long-term investment can you make?
- Risk Profile: Do you tolerate the idea of losing your investment, or do you want to invest in the safest possible destination?
- Yield Expectation: How big of a return can you expect if you also consider the previous two questions?
- Costs: Are the costs of your investment eligible?
With digitalization, investing has become accessible to virtually everyone. In the old days, some of the investment targets were only available to large investors, but with the help of the Internet and mobile applications, the CEO and the food courier who brought him lunch can trade in the same destinations.
The problem for a start-up investor today is, instead of a small number of properties, their quantity. In the following sections, we will open up some of the most common investment targets and their special features.
The word “investing” reminds many of the stocks. The shares are, in effect, shares listed on the company’s public trading, and the market value of these shares is determined by the stock exchange. Equities are a fairly risky investment – if a company goes bankrupt, you may lose all the funds you invest in it.
Although equities carry their risks, they are still a very lucrative investment at best. Equities perform well for investors, especially in the long run, but in the short run, their value can fluctuate sharply.
Shares can yield returns in two different ways. If the value of your stock goes up on the stock exchange, your capital will increase. You can also earn an annual dividend income from the profits made by the company.
Equity investing is suitable for a person who is ready to make a long-term investment and can take risks. It is good for an investor in individual shares to get acquainted with the operations of companies and to actively monitor the stock exchange.
Fund investing refers to products offered by investment companies or banks that allow an investor to diversify their investment into many different destinations. The items can be equities, fixed income instruments, or combinations thereof.
Mutual funds are especially popular with small investors, as fund units allow an investor to become the owner of many different companies indirectly. In this way, the risk of the investment is significantly reduced compared to the investor investing all their money in one or a few objects.
An ETF, or Exchange Traded Fund, is a fund that, like shares, is traded on a stock exchange. Almost all ETFs follow some sort of index. These indices may consist of stocks, bonds, or gold-like commodities. ETFs are more cost-effective than regular funds.
The funds are suitable for the investor who wants to get into investing easily and does not want to take too many risks. You can invest a larger amount in the funds at once or increase the investment, for example with a monthly savings agreement.
How to invest in funds?
Fund units can be purchased from banks or investment firms.
Investing in bonds is based on the return that the creditor receives from the interest charged to the debtor. Bonds are loans that are divided into several smaller tranches. One can be issued, for example, by a state or a company that wants to borrow money. Generally, investing in bonds will yield a fixed and steady return over the period specified in the bond. Bonds can also be traded in the same way as shares. If a company goes bankrupt, the investor in the bond may lose all of their capital.
How to invest in bonds?
Bonds can be invested by buying them through either a bank or an intermediary. Bonds can also be invested by purchasing units from funds that invest in a large number of different bonds.
Commodities have been invested through the ages, and for the average investor, the most familiar of them is probably gold. Other commodities used for investment include silver, platinum, oil, coal, and agricultural products. Most of the investments in commodities are made on specialized exchanges through futures contracts.
How to invest in commodities?
An ordinary investor can invest in commodities through ETFs. If you want to invest in gold, you can buy it from special gold brokers.
The idea of forex trading is to exchange one currency for another. Forex trading used to be controlled only by banks and large companies that use huge amounts of capital, but today ordinary retail investors also have access to foreign exchange trading through various trading platforms. Currency trading, unlike many other forms of investment, is fast and highly volatile.
When conducting foreign exchange trading, the investor must be able to analyze and predict the exchange rate rises and falls. In addition to high-profit opportunities, foreign exchange trading involves very high risks.
How to invest in forex trading?
You can invest in forex trading using a specialized CFD broker, such as Plus500, AvaTrade or eToro.
A peer-to-peer loan allows an investor to try banking. Peer-to-peer loan services allow loan applicants to find individuals who are willing to lend to them against interest income. In practice, however, the lender does not finance the loan of an individual borrower, but the investment is automatically diversified into several different risk peer loans.
How to invest in peer-to-peer loans?
You can invest in peer-to-peer loans through many different peer-to-peer loan services. The best service to invest in peer-to-peer loans is Bondora.
Real estate investment
Real estate investing is a familiar form of investment for many through owning their own home. Real estate investing often requires large start-up capital, and it is not always easy to get rid of investment quickly. At its best, however, an investor in real estate receives a stable cash flow as well as protection against inflation.
How to invest in real estate?
In addition to buying traditional homes, real estate, or land, you can invest in real estate using funds sold by banks or brokers.