It’s been three years, but I still remember how I felt when I bought my first ETF. Excitement, uncertainty (am I making the right choice?), but most of all pride! The first step had been taken. Looking back now, I think: why did I wait so long! Are you still hesitating to start investing? I get that! This helped me take that first step.
This article was written by Annemarie Bos, Elfin member and role model
The basics: a financial plan
Investing is done with money that you can spare for a longer period of time. Personally, I only invest with money that I know I won’t need for the next (at least) 10 years. But how do you know how long you can miss your money? The basis is a financial plan for yourself!
What income, but more importantly, what expenses do you expect in the coming years? Consider major expenses for your home, family, car, vacations, etc. For these expenses (and unexpected costs) you want to have a savings buffer. Why? Because you need the money in the short term (less than 10 years) and don’t want to run the risk that the stock markets are just low at the time you need your money.
Do you have a good savings buffer, do you know what big expenses are coming up, and do you have money left over each month that you don’t need right away? Is that 3x yes? Then investing might be an option for you!
Dreaming and goal setting
What is the reason you want to start investing? Do you dream of retiring from work earlier, do you want to become financially free, pay for your children’s studies or do you simply not want your money to become worth less and protect your assets? So many people, so many wishes! What do you want to achieve?
For me, there were several reasons to start investing:
- Building wealth to be able to retire no later than age 60 (if I want to).
- Protecting my wealth from inflation by putting it to work for me and taking advantage of the interest-on-interest effect.*
- Giving my children a good financial start later, by investing for them and (when they are older) taking them through the possibilities of investing.
A dream without a plan is just a wish! So what does it take to make your dreams come true?
From dreams to concrete goals
I tried to make my dreams and goals concrete by looking at how much money I needed at what time.
If you know this, then you can calculate back what you need to set aside each month now to reach your goal.
For example, do you need €300,000 in 25 years to retire early?
How much money do you need to save or invest each month to reach your goal?
Assuming an interest rate of 2% on your savings account, you would have to put in €772 a month for 25 years to save this €300,000.
If you assume a 6% return on your investments, you need to invest €441 each month for 25 years to raise the same amount.
It was an eye-opener for me to see these differences.
Except that saving still felt like safer and, more importantly, I had many questions and assumptions about investing, such as:
- Investing is very risky, isn’t it?
- What should I invest in to get a minimum 6% return?
- Am I making the right choice by starting to invest?
- Should I keep a daily eye on stock market news?
- Don’t I need a lot of money to get started?
I had just joined Elfin, which helped me get answers to these questions.
Increase knowledge and make choices
To learn more about investing, I started with Elfin’s “start investing” e-course. The nice thing about this was that I could learn more about investing at my own pace, but also ask questions right away to the community of women who were already more advanced than me.
Secretly, I was actually looking for: invest in this, then you’re always right! But I soon found out that this flag does not fly. Investing is personal, every financial situation is different and different choices suit that. But how do you know if you are making the right choice?
Discovering my investment style
For me, the most important thing is to know what options I have. From which options can I choose and what are the advantages and disadvantages. I know that I don’t like taking a lot of risk with my money, that I am a lazy (passive) investor who puts in money to invest on a monthly (automated) basis, and that I don’t want to select individual stocks myself because I don’t feel like digging through the company data of company X. This says something about me as an investor and thus the choices I make. This says something about me as an investor and thus the choices in which I invest.
Is this a good choice? It’s a choice that suits me right now and fits my long-term goals. If my financial goals change, I can always make changes again in the way I invest. For example, I am currently about to take another next step in my investment adventure and find that these questions come up again.
Think big, start small
Investing, I know from experience, can feel like a big step. With a small amount of money, I bought my first ETF in October 2021 for €72.34. Where it felt like a huge step then, for me now it’s like saving, something I do by default at the beginning of the month. With occasional small pains in my heart that I didn’t start sooner. Because “time” really is your best friend in investing because of the interest-on-interest effect,* which makes your money grow faster and faster the more time you have. Have you increased your knowledge about investing, does investing suit you and do you have monthly money left over that you can spare for a longer period of time? There is no better time to start than “now.” Put your money to work for you and start fulfilling your dreams and goals.
*The interest-on-interest effect is also called compound interest or Einstein’s 8th wonder of the world. It means that when you receive interest on your money and you don’t withdraw that money, you receive interest on that interest again. Thus, your wealth grows without you having to put in any extra money yourself.
Also start investing?
But don’t know where to start and what first step to take to make your first investment purchase?
Become a PLUS member now and start the‘start investing’ course right away.
