Have you ever thought about making your money work for you instead of just parking it in your account Then you’ve come to the right place, because this is all about investing, and it’s finally understandable for beginners. But there are also risks included. Lesser risks you have when registering at Bizzo Casino.
Many people shy away from investing: it’s too complicated, too dangerous, too stressful. But it doesn’t have to be that way – the following steps can help you finally get started.
YOUR CHECKLIST TO START
1. Investing: Beginners need goals
- Set goals: Before you get started, think about what you want to achieve with your investments. Are you saving for retirement, a major purchase or simply for a little more financial freedom? Having clarity about your goals will help you choose the right path for you.
- Willingness to take risks: Think about how many risks you can take. Put simply, the lower the risk, the lower the return on your investment. At the same time, if you are saving for a purchase, the monetary value of the chosen form of saving should not fluctuate too much, otherwise the day of the purchase will come – and you won’t want to liquidate the money because the value of your investment has just fallen.
- Sustainability: Money always has an impact. Currently, this is often negative. But money can also have a positive impact. If this is important to you, look out for eco-banks and green financial products. Read also how you can recognise sustainable funds.
2. Investment strategy: it’s all about the right mix
You can minimise your risk with the right mix. When people talk about ‘creating an investment strategy’, many beginners are already put off. It’s all about the question: When should how much money flow into which type of investment?
- Diversification: The golden rule is not to put all your eggs in one basket. Spread your money across different asset classes such as shares, bonds and funds. This way you minimise the risk and can still benefit from the opportunities.
- Long-term perspective: Always invest with a long-term horizon in order to benefit from compound interest effects and market trends. Do you want quick money? Then you need to ‘speculate’ on the stock market – with the corresponding risk. This is not recommended for investment beginners.
- Sustainability: Make sure that at least part of your investments are in green finance. The more, the better it is for your future and that of the planet. This also reduces risks, as investments in unsustainable industries (such as CO2-intensive mobility) will lose value sooner or later due to climate change.
3. Shares, bonds, ETFs – What are forms of investment?
Some banking jargon may seem daunting to beginners at first, but it’s not all that complicated:
- Call money and savings bonds: These are modern versions of ‘savings books’. They are safe, low risk forms of investment, but they also bring little return, at least in the current period of rather low interest rates, which has been going on for some time now. However, according to the principle of ‘not all eggs in one nest’, they can very well be part of your investment strategy, as you do not suffer any major losses with these forms of savings and have few fluctuations and few risks. Call money is available daily, whereas with savings bonds you have to set the savings period for a certain time, but then also receive the interest for this period.
- Shares: With a share, you acquire a stake in a company. The value of this security (hence ‘security’) increases depending on how sought-after these company shares are in securities trading at the time. You are therefore speculating that the company will increase in value and that your share in the company will become more valuable. At best, you can make a lot of money with shares, but at worst you can also lose a lot of money.
- Investment fund: A fund is a collection of selected shares, bonds or other financial instruments. Fund managers select which securities they place in the collection. This allows them to control the characteristics of the fund, such as risk, return or sustainability. Because funds mix many different assets, the risk can be lower. You also no longer have to deal with the individual companies – the experts do that for you.
- Bonds: By buying bonds, you lend money to companies – and eventually get it back with interest. Nice: Comparatively safe, regular interest income. Not so nice: The number of green bonds is still limited and the yields are low. Alternative: Direct investments.
- Special funds: Depending on how they are structured, there are other funds, such as property funds or very special sustainable funds that promote social projects, for example.
- ETF: ‘Emerging trade funds’ typically follow an investment strategy that consists of replicating the performance of indices such as the German share index (DAX). Advantage: Often broadly diversified, low fees. Disadvantage: There is often a discrepancy between promise and reality in terms of sustainability. Also, unlike funds, ETFs invest ‘passively’: there is no fund manager who actively influences the companies in which he/she invests. Yet this (known as engagement) is a very important component of a fund.
Important: Make sure you choose a financial institution with deposit protection. If your bank goes bankrupt, your money is protected up to an amount of 100,000 euros. This deposit guarantee applies – in different ways – to banks within the European Union. The protection applies, for example, to overnight money, fixed-term deposits and current accounts, to the savings book and the clearing account of a custody account. The deposit guarantee does not apply to ETFs, shares and other securities.
4. Get started: investing as a beginner
- Get informed: Before you invest, do your research. Read fund analyses, annual reports, sustainability reports and other analyses to make informed decisions about where and how you want to invest. Nevertheless, mistakes can happen: Therefore, only start with sums that you can handle!
- Open a custody account: A custody account is nothing more than an account for securities, which can be shares, bonds, fund units or other investments. You can usually manage your custody account easily online, just like other accounts.
- Pay attention to this: Pay attention to fees that could reduce your return – beginners in particular make the mistake of using too many options in parallel when investing and thus paying more fees than necessary, or investing too little – which then yields less with the same basic fees.
