Saving will not help you achieve goals like this in low-interest-rate phases. Savings are currently paying only minimal interest, none at all, or even negative interest. Money loses real value in the savings account because inflation eats away at interest. For example, if you earn 0.1 percent interest on the savings account, but the inflation rate is 0.6 percent, your money will be worth less at the end of the year than it was at the beginning of the year. It’s going to stay that way for a while. How do you protect your assets from this loss of purchasing power?
Beat the loss of purchasing power
Invest your money in stocks. You don’t need to be an investment specialist to do this, and you don’t need in-depth knowledge of the capital markets. With the right investment products and professional advice, you too can achieve your financial goals. Here is a simple plan for your first investment:
- Define your investment goal.
- Define your investment period.
- Define your risk tolerance and ability.
- Develop your individual investment strategy.
- Only choose investments that you understand.
Step 1: Investment objective
What do you want to achieve with the first investment: security, return, or liquidity? You cannot achieve 100 percent of all goals. This means that you have to weigh what is more important to you and thus position yourself in the magic investment triangle:
- Security: How big is the investment risk? Very safe investments yield less and are usually less liquid.
- Yield: How good is the interest in the capital? High-yield investments tend to be less liquid and riskier.
- Liquidity: how quickly is the money available? Highly liquid investments such as time deposits, which are only invested for a few months, return poorly or not at all.
Read also: Learning What Is Banknote For Loans
Step 2: Investment Horizon
How fast do you want to reach your goals? Make short-term plans for the trip around the world, medium-term plans for your children’s education, and long-term plans for greater financial security in old age. The more time you have, the better the results. Because time evens out fluctuations in value over the long term and you build up more capital.
Step 3: Willingness and ability to take risks
Do you know how much risk you can or want to take as an investor? The ability to take risks depends on the financial leeway and financial obligations, the willingness to take risks on personality and personal life situation. The less risk you want or are able to take, the more important security and liquidity are.
Step 4: Investment strategy
The first three steps are the solid foundation for your strategy and thus for your investment. The strategy shows the way to the goal and is crucial for the results. When investing for the long term, it’s crucial to stay true to your strategy and not change course in the first storm. Unless you fundamentally change your goals.
Step 5: Investment Solutions
Invest only in assets you understand. Investors should only invest in assets that they understand. You should always test the waters before diving in. This simply means that you have to understand what you are putting your money into. Without proper understanding, you have one foot soaking in danger.
Don’t put everything in one card
We asked our investment professionals what their advice would be to a beginner. These are their best investment tips:
- Develop your strategy based on your investment objective, investment period, and risk tolerance and capacity.
- Stick to your strategy even in turbulent times and use price slumps as favorable entry opportunities.
- Be patient and let time work for you. The longer your time horizon, the higher your chances of return.
- Don’t put all your eggs in the same basket and invest your assets in broadly diversified investment solutions.
Investment professionals diversify. You don’t put all your eggs in the same basket but spread the risk across different asset classes, such as stocks, bonds (bonds buy 2022), or gold. You can do the same with your first investment.