To invest money? If you want to start investing, there are two options. One sees golden mountains and can't wait to get started. The other immerses himself in all the information, and notices that there is a lot to learn before you really master it.
We help you estimate the risks of investing, while you can then quickly start. So do you want to know what it is, how to approach it smartly and what exactly is the meaning of investing? We explain what you can invest in, how it works and why stocks, bonds or other securities work better than saving.
What is investing?
There are all kinds of investments. Investing is always about investing in something that you think will hold its value. Or even increase in value. You are not consciously investing in something that is depreciating in value.
You can invest in all kinds of ways, for example in stocks, bonds, investment funds and, for example, commodities or even cryptocurrencies such as Bitcoin. Keep in mind the difference between investing and speculating. In the first case, you make investments, often for the (medium) long term. Speculation is much more active, as your positions will last a few hours to a few days at most. So do you think the gold price or the value of a Tesla stock will rise quickly? And do you want to make the return within a day? You speculate, instead of investing.
Please note that platforms such as Plus500 and eToro are for speculation. You keep a close eye on the price on a daily basis, in order to immediately respond to it. You can invest, for example, via DEGIRO or Binck. You take positions that you hold for longer, because you rely on the value development.
Start investing: 5 useful tips
You are going to start investing. But, how do you do that well? You can invest smartly by taking these 5 handy tips into account:
- Use money you don't need
- Choose the term you want to invest in
- Ensure sufficient spread
- Pay attention to the costs you pay
- Make sure you understand it well
You can only invest money that you don't need right away. You make investments for the (medium) long term, and in the meantime you can't buy anything else.
Many investors save for their important buffer first. If they have enough savings on hand, they make investments. In this way they do this automatically with money that they do not think they need immediately. Something can always happen, but in principle you want to use money that you can leave behind for at least a number of years.
2. Choose the term you want to invest in
When you start investing, you determine in advance how long you want to do that approximately. You can choose from three shapes:
Short-term
Are you planning to speculate on daily rates? You invest in the short term, for example to make a good return within a year. There is actually no question of investing, because the term is too short. You take a lot of risks by actively trading.
Medium term
Do you want to invest for the education of the children, for an extra pocket money in 5 or 10 years or just to try it out for a while? It is about the medium term. Do not choose your investments too risky, because you can no longer just absorb large fluctuations (read: falls in the stock markets).
(Very) long term
Are you investing for your pension or in another way for 15 years or longer? You invest for the (very) long term. That means you can take a little more risk. You can make up for any (significant) price drops in the remaining time. Tip: reduce the risk as the end date of your investments approaches.
3. Ensure sufficient spread
What do the best investors invest in? It is difficult to indicate specific stocks, bonds and investment funds. What the investments of successful investors have in common is that they show a lot of diversification.
If you would invest in one company, you would be completely dependent on it for your return. Is it going well? Then you will see that in your investments. But is it less? Then you can lose a lot. By spreading you dampen the extremes, so that you have a more stable return on average.
You can diversify into sectors (technology, food, etc.), countries and regions (United States, Europe, Asia, etc.) and types of investments (stocks, bonds, mutual funds).
4. Pay attention to the costs you pay
If you are going to invest money, always pay close attention to the costs that you pay. in particular Transactions are relatively expensive, if you only have a relatively small capital. So do you invest with, for example, €1,000 to €10,000? Don't make too many trades.
And pay attention to the management costs, for example if you opt for investment funds. Management costs of 1% per year do not seem high. However, compared to 6% historical average annual return, it is 17% of the expected return (1/6th of 6%).
5. Make sure you understand
Know the meaning of investing and learn how it works exactly. Know why investing is attractive and also dive into the risks. In this way, discover what others invest in, why they do that and what risks you run. Because, how does investing in, for example, crypto or shares work? Only if you can reasonably answer that you should start investing. This prevents you from suddenly losing money afterwards, because you didn't really understand it properly.
Note: beware of turbos and other leveraged products. You can invest with relatively little money with high amounts, because you temporarily borrow money. You can do that while speculating, but you are taking big risks.Investing money: don't underestimate the risks
Are you going to invest money? Don't underestimate the risks. Make sure you know the stocks you choose, as well as the bonds and, for example, funds. That way you have a good idea of your investments and you know what they stand for. It prevents clumsy mistakes and that you fall into typical pitfalls.
On average, investing produces an attractive return in the (long) term. In particular, a good spread and good knowledge of the risks, investing and how it works contribute to this.
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