The most essential facts in brief
Strategy: Before investors invest money, they should have a clear plan. This depends, among other things, on personal goals and individual risk tolerance.
A few steps: Only a few steps are necessary to start building up assets as a beginner. The most crucial step is to find out about the various investment options.
Options: There are various ways to invest money. These include overnight and fixed-term deposits or investments on the capital market, such as shares, funds, or ETFs. Beginners, in particular, can benefit from ready-made ETF portfolios, such as those offered by our asset management service.
So, if you have all the necessary information, we will present you with the most critical steps. So go ahead now and start betting on your success.
What is essential for beginners when investing?
Before beginners decide to invest, it is essential to take their time. With so many ways to invest money, losing track is easy. With extensive research, beginners can familiarise themselves with investing, learn about the various investment options, and develop a personal strategy. They can take their wealth accumulation into their own hands in just a few steps. The earlier, the better. Investors can benefit from the compound interest effect when building up assets over the long term. This means that the profits made are reinvested and not withdrawn. The earlier the money is invested, the greater the compound interest effect. When investing, it is also essential to remember that costs or fees may be incurred for administration and taxes on profits. For example, some providers charge transaction costs when securities are bought or sold. Our asset management service has an average total cost of 0.59% p.a. It is also important to take inflation into account. Inflation describes the increase in the general price level, which causes money to lose purchasing power over time. Investors can counteract the effects of inflation with an investment. Cancellation policy: With us, you always stay informed. With our free newsletter, you will receive the latest information about investing directly in your mailbox. Stay updated every week, and you can unsubscribe at any time.
Steps to entering the financial market
For future investors who have not yet dealt with the topic of investing, it makes sense to approach asset accumulation slowly. This is because investing in the stock market involves risks. With a structured approach, beginners can quickly grasp the financial market and benefit from attractive potential returns.
Step 1: Inform yourself and identify savings potential
Finding out about investments in advance is essential for beginners. After all, it is crucial to understand what you are investing your money in. The various options for general wealth accumulation and individual products should be considered. Before beginners invest in individual shares or other securities, they can, for example, read the annual report of individual shares or gather all the information on specific ETFs. It should be noted that past prices do not indicate future performance and returns. Investing in securities is always associated with risk, and a high return cannot be promised. It is also advisable not to rush into anything and only invest as much money as your financial situation allows. Among other things, monthly fixed costs and a nest egg for unforeseen expenses should always be considered. It also makes sense to prioritise repaying debts, such as a loan. On this basis, investors can determine the optimum savings amount they wish to invest. A call money account, for example, is suitable for saving. Call money generally pays significantly higher interest than a current account and offers the same flexibility. Investors can access their money at any time.
Step 2: Define your goals and investment strategy
Retirement provisions, financial freedom, and buying a house are many reasons to build up assets. The earlier you start, the faster you will generally reach your investment goal. Beginners can choose a personal investment strategy to suit their goals. This determines how much money can be invested over what period, how much return you want to achieve, and what level of risk you can take. Investors can find a balance that meets their needs and goals by carefully weighing up the opportunities and risks. For beginners, it may be worth investing a small amount of money as a trial first. This means starting with a small amount to gain a deeper insight into finance, gaining initial experience, and then gradually building up assets and investing more significant amounts. For example, if you only want to “park” existing capital for a few years at low risk and can do without it, you can invest the money in fixed-term deposits. With fixed-term deposits, the capital is invested at a fixed interest rate over a fixed period.
Step 3: Choose the right asset classes
Investors can choose from various forms of investment to invest their money. Different asset classes are suitable in combination depending on the investment strategy and personal preference. Each asset class has its advantages and disadvantages, which must be weighed individually. The various (typical) forms of investment are briefly explained:
- Type of investment
- Explanation
- Call money
Call money is a short-term investment in which money is invested in a call money account with a variable interest rate and is available daily.
Fixed-term deposits are a form of investment in which money is invested in a fixed-term deposit account at a fixed interest rate over a certain period.
Shares represent shares in companies and offer investors the opportunity to benefit from price increases and dividends but involve a higher level of risk. They are traded on the stock exchange.
Bonds are debt securities where investors lend capital to the issuer and receive interest in return until the bond is repaid at par or sold.
ETFs (Exchange Traded Funds) are index funds traded on stock exchanges and offer broad diversification. They use a passive investment strategy to track an index or a specific market.
Funds contain many different assets and are traded via a fund company. Fund managers try to outperform the market with an active investment strategy and achieve higher returns.
Some beginners also allocate a small portion to precious metals as a long-term store of value and inflation hedge. If you prefer tangible assets, consider evaluating a selection of silver bullion bars, which typically come with low premiums over spot and straightforward buying and storage options. As with any alternative asset, review liquidity, costs, and how it fits your overall diversification plan.
Step 4: Check risk diversification
Spreading risk (diversification) is an integral part of asset accumulation. By spreading money across different asset classes, the risk is spread widely. For example, investors could invest part of their assets in individual companies in shares, in a call money account, and in ETFs. Savings deposits such as call money, fixed-term deposits and investments in bonds are considered low-risk, while individual shares, funds, and ETFs generally entail a higher risk. Diversification is also possible within an investment firm. Some shares carry a higher risk than others. In the same way, funds and ETFs can have different risk profiles depending on the risk of the assets they contain. With WeltSparen’s asset management, the money invested is already diversified across the equity and bond markets worldwide. This reduces the risks of the investment and increases the potential returns.
Article edited by Alexander Elisab