Investing is an ideal way to make your money work for you, instead of you working for your money. You may think it’s super complicated to get into investing, but really: it’s not that bad. In this article, we give you 5 tips for your first investment. Good thing.
This article we wrote also appeared on LINDA.nl
BELOW
From your neighbor to that young guy in his villa in Bali you see passing by on Youtube: it seems like everyone is investing these days. And we get it, because it can be a super smart way to achieve your financial goals. With investing, you put your money aside, in a special account, aiming for future financial gain.
Simply put, you make your money work for you, instead of you working for your money. After all, while you’re sleeping or on vacation, for example, your investments continue to run. Well investing is not without risks, so it’s important that you know them. And then, with the help of the following five steps, you can start investing yourself. Even with small amounts.
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STEP 1: GAIN KNOWLEDGE
On the Internet, you see a lot of great stories popping up. And if it sounds too good to be true, in the case of investing, it really is. Knowledge is power, so make sure you learn what investing is, what products you can invest in (from stocks or a fund, to real estate or gold) and what risks the different products carry. What is important to know is that investing is very personal. The choices you will make should fit who you are, what goals you have and what your current financial situation is. So don’t be fooled or tempted to take too many risks.
There are also three more golden rules that you take with you in your investment journey:
1. Risk spreading
You don’t want to bet on one horse, but preferably on all horses, on all equestrian centers, all over the world.
So make sure that when you invest your money, you don’t put all your money into one company or one product.
2. Time
When you invest your money, your money moves in the free economy.
And the economy is like a human being: it has good days and bad days.
You want to take the time to grow your money and avoid possibly having to withdraw your money at a time when the stock market is just having a dip.
3. Fees
If you use an online platform or app to invest, it’s common to incur fees.
But the higher the fees, the less you have left for yourself.
So look carefully at the price tag attached to your choices.
STEP 2: IDENTIFY YOUR NEEDS
The most common reasons for investing are: preservation of wealth (hello inflation!), achieving financial goals faster and achieving financial freedom with passive income. A plan that suits your needs and your situation is going to give you tools to make the right choices later. Do you want to buy a new car in two years? Then you might want to save up. See also the golden rule about “time. Would you like to retire early and build up an extra pot of capital? Or would you rather help your children study? All of these goals help you choose an investment, but also give you insight into how much money you should put aside. Want to stop working in ten years, but currently have no more than €100 left over per month to invest? Then that’s a mismatch.
STEP 3: DETERMINE HOW MUCH RISK YOU ARE WILLING TO TAKE
Don’t falling and rising prices keep you awake? Or is the sweat on your back the moment you see your investments drop in value? Again: when you invest your money, you want to put your money to work for you. That’s why you invest your money in the economy. That means that sometimes your investments go down in value, but in the long run they go up in value (assuming historical numbers and averages). You can have so much knowledge about investing, if you lack self-knowledge and start acting out of emotion, long-term investing becomes challenging.
The amount of risk you take goes hand in hand with your so-called “investment horizon. That’s a fancy term for: when do you need the money. The longer you have the time, the longer any declines in value can recover. Do you need the money for something important in two to three years? Then it might be smarter to just save. So write down for yourself when you want to reach your goal with investing, and at how much risk you are still comfortable sleeping.
STEP 4: CHOOSE WHAT YOU WANT TO INVEST IN
Stocks, real estate, funds, gold. ETFs, crypto, bonds – does it make you dizzy? There are lots of different products you can invest in. But how do you choose something that suits you and your needs? That’s tricky, but there is one investment product that is perfect for beginning investors (and advanced investors): ETFs. An ETF stands for Exchange Traded Funds. Such an ETF follows an index. You’ve probably heard of the AEX index, the Amsterdam stock market. Or the Dow Jones, an American index. By making a copy of an index, a basket of stocks is created. Suppose you invest in an ETF that tracks the AEX index, that ETF contains the 25 stocks represented in the AEX. This is convenient, because you invest in 25 companies with a single investment, instead of having to buy all the companies separately. So with one purchase, you can instantly spread your money across many companies. This is an easy way of well-spread investing, at low cost.
Another way to invest easily is in funds. Parties such as Brand New Day, Semmie, Meesman, ASN but also many “normal” banks offer so-called mutual funds. All you have to do is open an account, choose your risk profile and deposit money.
STEP 5: OPEN AN ACCOUNT, DEPOSIT MONEY AND INVEST IN YOUR CHOSEN PRODUCT
To actually make an investment, you have to open an investment account somewhere. Before digitalization, you had to call the bank to buy a stock. Now you can buy a share while sitting on your own couch with your smartphone. A lot easier, in other words. But the hard part is: there are many providers, so how do you choose one that suits you?
In the Beginning to Invest course, you’ll get help choosing a good investment vehicle that suits your needs.
The choice you make depends mainly on how you want to invest.
Do you want to build your own equity portfolio and invest in stocks or ETFs of your choice every month?
Then consider DEGIRO, Easybroker, BUX Zero or Saxo.
Would you like to invest in funds automatically and without looking back every month?
Then you can choose, for example, Brand New Day, Peaks, Semmie, ABN Amro, Meesman.
When you choose an investment party, pay close attention to the following points:
– Supervision
Is an investment party covered by the deposit guarantee scheme? Are they regulated by the AFM and DNB? A party offering its services in the Netherlands must be approved by the AFM and DNB. Permits should always be listed on the website. Sometimes you see a banner “Beware! You are investing outside the supervision of the AFM.’ So that means: beware.
– Costs
Costs can weigh tremendously on your returns, we wrote. And often, for every transaction you make (every time you trade in the stock market), you pay fees. Ideally, you want to keep these as low as possible. Information about this should always be easy to find on party sites.
If not: move on.
– Service
You don’t always know this in advance, but it is very important. How fast and how well does the service desk respond when you have questions? After all, it’s about your money and you want to feel good about this.
– Conditions
In addition, you would like to know the terms and conditions of investing with the party of your choice. Can you withdraw your money freely? Do you have to pay to open an account? How does the party deal with regulations?
– Returns
With investing, you want your money to grow.
When you choose a party that invests the money for you, check what their returns are.
You want a party that has good returns, and invests in the right products.
Once you’ve chosen your favorite, it’s a matter of opening an account, depositing money and buying your first stock or ETF.
And one last tip: That first threshold is the most exciting. What if you do something wrong? Give yourself some ‘learning money’ and give yourself 10 or 20 euros to practice with. Once you invest this once, buy and sell a share and get to grips with how your chosen platform works and how to invest, your confidence will grow. Larger amounts can always be done. Give yourself time. Join Elfin, too, and learn all about investing.
