Getting started in the financial markets can seem like an insurmountable task. But investing isn’t just for Wall Street or Paradeplatz specialists.
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Step 1: Gradually develop your financial knowledge
“Investing for beginners: Getting started without financial knowledge.” This is, more or less, the promise made by many “experts” on the internet. But you can’t invest without a minimum of prior knowledge. However, you don’t need a degree in economics to get started. You’ll develop your financial knowledge throughout your investing journey.
Beginners should be aware of the basic concepts and principles . The best decision is one made with full knowledge of the facts
Whether you have experience in investing or not, defining your goals is the starting point for successful investing. Start by thinking about your wishes, dreams, and personal goals. Here are some examples:
From this, you can derive financial goals. These form the basis of your personal investment strategy . To define it, ask yourself the following questionAvailability: Can I get my money back sooner if I need it? Do I need to receive regular payments from my investments?
Steps to follow for a good investment
Investing your money allows you to make it grow. Find out everything you need to know in our guide
Step 2: Understanding the Magic Triangle of Financial Investments
Liquidity: The ability to quickly access your money. For example, you can quickly access money deposited in a bank account. Most of the time, a property doesn’t sell overnight.
Security: Protection against possible financial losses. Money deposited in your bank account is well protected against possible losses. There is a risk of loss of value due to inflation or bank failure. Stocks are also exposed to market fluctuations. In the event of a banking crisis, a bank’s stock price can plummet, even if the bank is well managed.
Yield: Chance of profit. Money hidden under the mattress doesn’t generate any return. On the other hand, a stock offers the possibility of capital gains and possible profit sharing (dividends).Indeed, no financial investment achieves all three of these goals equally. As an investor, for example, you must choose:
lower risk and greater availability. In return, you give up high earning potential. Money deposited in a savings account is an example.
Higher chances of profit with lower risk. In return, you forgo the ability to quickly access your investment. An investment in real estate is an example.
Higher earning potential and higher availability. In return, you accept higher risk. Investing in cryptocurrencies is one example.
Step 3: Choose the appropriate asset classes
Gold, real estate, bonds, stocks, funds: Investors can invest in a wide variety of asset classes. These categories are called asset classes. The main asset classes are described in our investment advice blog . For each asset class , you make a different trade-off within the magic triangle of investing.
For beginners , it is often worthwhile to use funds or asset management that combine different investments within and across asset classes. This makes it easier to get started with investing, as there is no need to trade individual investments such as stocks. Furthermore, diversification is guaranteed from the start.
Step 4: Diversification, i.e. spreading out your investments
No guide on “Investing for Beginners” overlooks the topic of diversification. It’s a key concept in the world of financial investments. To reduce risk while still generating profits, it’s important not to put all your eggs in one basket.
To put it simply, it’s about not betting everything on the same investment, but spreading your investment across different investments within an asset class and across different asset classes. Since investment diversification is such an important topic, we’ve dedicated a blog post to it.
Step 5: Regularly monitor your strategy
Financial markets are constantly evolving. And in life, too, things can change over time. That’s why it’s important to regularly monitor and review your strategy . If your personal situation or goals change, your investment strategy should also take these changes into account. Regular monitoring also helps you identify opportunities and reduce risks.
Online portals that show the performance of an investment are useful for monitoring an investment. It is also a good idea to regularly discuss investments and the corresponding strategy with an investment expert.
Step 6: Patience and discipline, the keys to success
In the long term, we align ourselves with the average price and thus compensate for price fluctuations. You will find detailed explanations on this subject in the article ” Average Cost Effect: Invest Step by Step and Profit from It .”
Investing for beginners: Talk to an expert
The seven steps outlined in this article are a good starting point for investing. By following these tips, you can gain basic investment knowledge and focus on your personal goals and investment strategies.
Finally, we have one more piece of advice for you: Discuss your investment strategy regularly with an expert. This way, you’ll benefit from extensive experience and professional support that will help you find the investment solution that best suits your needs.