1st tip: Determine the goal of your investment
As banal as it may sound, before you invest a euro, you should consider what your personal investment goal is. Only if you know this, you can prepare and inform yourself accordingly. Therefore, consider in advance why you want to invest money. Do you want it to enable you to live comfortably in old age, do you want to make a major purchase in a few years, or do you want to enable your children to study abroad? Only if you know what you are investing your money for, you can invest it in a disciplined way. If you don’t have a goal, your plan will quickly come to nothing.
Tip 2: Define your investment amount
Just as it is important to define a goal for your investment, you should also define the amount you want to invest to achieve that goal. Before you can set an investment amount, you should get an overview of your financial situation. Then you can determine how much money you can use each month for wealth accumulation. As part of this consideration, you should also determine whether you will withdraw and consume any interest or dividends you receive on your invested capital or reinvest it directly.
Tip 3: Determine the desired return on your investment
In order to achieve the desired final amount with your monthly investment amount, you need to know what the return on your investment must be, including inflation compensation. Once you have calculated this value, you can select the appropriate investment forms. You may then also realize that the return you are hoping for is not realistic. Inflation compensation is important and must be taken into account. Even a small inflation means a considerable loss of purchasing power over the years.
Tip 4: Always consider the costs and fees for your investment.
You should always keep in mind the different costs depending on the investment and consider them in your investment decision. Overnight and time deposit accounts at your local bank are usually free of charge. For equity funds, however, high management fees and issue surcharges may apply. These costs reduce your return. Index funds (ETF), for example, are very inexpensive.
Tip 5: Weigh your portfolio
From the beginning, you should try to structure your investment wisely. Always focus on your personal goals and try to find a balance between high-yield and low-risk investments. As a general rule, high-yield investments also entail a higher risk. Choose the type of investment that suits you. How to find the right type of investment for you is described in more detail in other articles on this website.
