Online investment options for beginners

If you look at the current credit interest, you will come to the conclusion relatively quickly that traditional financial products, such as overnight deposits, time deposits, savings accounts or capital insurance, no longer lead to the desired goal. The profits you make here are actually eaten up by inflation. In the end, you experience a real loss in monetary value. In this article, I will guide you with the best Online investment options for beginners.

But what other alternatives are available to private investors? Can you use the application methods of the professionals yourself as a beginner and what profit can be expected? We clarify all the questions on the topic.

 

Why should you invest money?

If you look at various forecasts, savers can not look forward to a bright future – there is still no evidence that the European Central Bank will leave its path and set a new course.

So if you want to invest profitably, alternatives are needed. Here are about

  • Bonds,
  • Shares or also
  • Leverage products available.

But many people simply don’t dare to invest money in such alternatives. Not only do they have great respect for the stock market and the related investments, but they are also afraid of losing their entire wealth.

But the money only becomes less if it is parked on the daily or fixed deposit or even in the savings book such as a checking account. If you don’t look at the quite attractive alternatives, you miss out on huge profit opportunities

Above all, equity investments – especially with a low-risk strategy – are highly recommended if you take a look at the possible returns that can be achieved. In the end, you don’t have to put all your savings on one card and decide on high-risk strategies – if you look at the stock market, you will quickly find that there are reasonably safe ways to increase your money.  

Note: Of course, many investors who previously only had to deal with fixed or overnight money think that you need a lot of money if you want to invest in stocks or bonds. But that is also not correct. Even with small amounts, such as around 50 euros/month, you can already invest.

It is only important that you do not perceive the alternatives to the savings book, daily and fixed deposits as a pure game of chance. Every beginner should, therefore, get information in advance and always take a look behind the scenes – because to believe that you can only listen to your gut feeling would be fatal.

So if you want to invest in stocks or bonds, it is important that you acquire basic knowledge in advance and then approach each other step by step. By the way, believing that you can get rich within days is also not a good attitude. Of course, there are always presentations of strategies on the Internet that never result in a loss – but extreme caution is required here. There is no strategy that always leads to success.  

Bank or stock exchange – how do the investment products differ?

If you make an appointment with your bank advisor, he will primarily present classic products – this includes both overnight money and time deposits. Such products are offered by almost every bank today. Of course, there is also the savings book or capital insurance – at the moment, however, such products are hardly recommended by a bank employee, since in reality no profits can be posted here at all.

But you should also no longer recommend daily or fixed deposits – at least not when it comes to investing profitably, i.e. building up assets.

A call money account is advisable if you want to keep part of your assets within reach. Deposits that are parked in a call money account are available at all times – that is, the so-called financial emergency reserve should be located here. So if there is an unpredictable expense, such as if the washing machine breaks down and needs to be repaired or replaced, it is important that you always have access to part of your assets. If you opted for the fixed deposit, your assets would be “blocked” because the money is only available after the term you selected in advance.

  • Missing exchange rate fluctuations are of course an advantage.
  • It is also advantageous that the amount is secured up to a sum of EUR 100,000 (European Deposit Protection Fund). If the bank registers for bankruptcy, you will not lose a cent – up to an amount of EUR 100,000.

Such collateral naturally makes the overnight money extremely attractive. However, these securities must also be paid by the customer – currently with a non-existent credit interest. Because even if overnight money is offered free of charge, i.e. the bank does not charge any account management fees because this is usually always an online offer for bank customers, you actually experience a real loss in monetary value. At present, the credit interest rates are between 0.125 percent and 0.5 percent – but inflation is much higher. 

If you decide against the bank’s traditional products, which of course are very safe, you can sometimes enjoy higher interest rates and returns if you put your money into alternative investments – such as investing in shares. Here you benefit from profits from price increases or also from the dividends (profit distributions). However, the risk must not be neglected – price fluctuations are simply part of it.

But there are tips and tricks on how to reduce the risk when you choose alternative financial products.

What options are available to today’s investors?

If you look at the stock exchange because you have come to the conclusion that classic products do not lead to the desired success, you will find relatively quickly that there are various investment products. You can invest in stocks, funds, bonds, exchange-traded funds (ETFs for short) or in various leverage products.

Security-oriented investors should invest in exchange-traded index funds

All those who describe themselves as security-oriented should start by looking at the ETFs, i.e. the exchange-traded index funds.

Although these are funds that are not managed by a manager, they ultimately only replicate a certain stock index, such as the German DAX. The investor benefits from the positive overall development.

It does not work against the market, as is the case with an actively managed fund, but cooperates with the market. In the end, you want to do as successfully as the market and not win against the market.

  • ETFs are also convincing because they avoid high fees. ETFs are extremely inexpensive. In addition, it is a very safe investment; the risk that is taken here is extremely low.

On the other hand, if you think the market can be beaten, you should choose a fund that is actively managed – by a fund manager who wants to be better than the market. In this case, you want to beat the average returns of the market. The fund manager creates a basket of various types of investment, which he then also manages himself. There are several options to choose from:

  • Pure equity fund,
  • Mixed funds,
  • Real estate funds or
  • Commodity fund

What funds are there?

If you only want to invest in shares, you should choose the classic equity fund. In this case, the fund manager then only invests in certain stocks that – according to the manager – are particularly promising.

Opportunity is also a buzzword here because such an investment can almost only be recommended to opportunity-oriented investors who also want to invest for several years. All those who are not afraid of the risk and also have a long investment horizon can, therefore, deal more intensively with the topic of equity funds.

It should be noted that – depending on the chosen investment period – returns of between 5 and 10 percent/year are possible. Of course, stocks are subject to fluctuations, which can lead to losses. So you have to have strong nerves as well as patience to be able to sit out crises.

It is different when you choose a so-called pension fund. Bond funds, also called bond funds, are the ideal alternative for security-oriented investors who do not want to take a high risk. The investor invests in so-called fixed-interest securities issued by companies, states, and countries. These are bonds so that the publisher can pay for expenses or implement projects.

So-called mixed funds are also interesting. Here the invested money is put into stocks as well as bonds.

Leverage products can only be recommended to speculators

All those who like to speculate, i.e. love the risk, can very well work with so-called leverage products – these include, for example:

  • Derivatives,
  • Options or also
  • Certificates.

At this point, however, it is important to mention that there are some study results that indicate that more than 90 percent of traders destroy their assets  – within the first 36 months. For this reason, it is important that you deal with this matter particularly intensively in advance and also realize that you can definitely lose a lot of money here. 

Of course, if the market moves in the desired direction, you can make really high profits. But in the end, it’s not about being successful – it’s about staying successful. And that is extremely difficult, especially with leverage products.

Of course, there are also profitable investment opportunities outside of the stock exchange – for example, crowd investing in start-ups or in real estate. But of course, such systems are also not entirely harmless.

How do you invest in money?

It should be noted that investment funds or shares cannot simply be bought on the stock exchange in the course of an afternoon of shopping. Anyone who decides to invest in these investments must do so in advance

1. open
a custody account and 2. also have a depository for the purchased securities.

However, this should not pose any major challenges for future investors: simply make an appointment with your bank employee or open an account directly on the website of an online broker. It is important that you make a comparison before opening an account, of course.

  • At this point, it can be said that the offers of the online brokers are much cheaper than the offers of the branch banks.

If you carry out a comparison, it is advisable not only to pay attention to the fees but also to compare the services. There are various platforms on the Internet that can be used to carry out a free comparison.

How long can you do without the savings?

Before you decide to invest, you have to answer a few questions yourself. One – and that is very important – the question is how long you could actually do without the amount invested. There are different terms, of course, depending on the product and the type of investment.

When it comes to bonds, one often speaks of a three- to a seven-year term.

Note: At this point, it should be mentioned that the following rule should be taken into account: The longer the term, the higher the interest rate – so if you can do without capital for several years, you can end up with a pretty good return.

It should also be mentioned that there is no maximum term for many investments. This means that anyone who invests in shares or funds does not commit themselves, but can access their money at any time. However, the question is whether it is worth it. Because you can only expect a good average return if you pursue a longer investment horizon.

So if you invest in funds or stocks, it is important not to discard everything after a few months but to remain patient. A multi-year investment is recommended – the longer you invest in stocks or funds, the higher the average return to be achieved in the end. 

How much should I invest?

There is no upper limit for shares. Those who have a lot of capital at their disposal and who believe that the majority is invested in shares are legitimate and sometimes promising, provided the market moves in the right direction. Of course, it also depends on how expensive the shares are – if you invest in a company that offers shares for 2 euros/shares, a relatively large number of shares can be acquired with 1,000 euros. It is different if you want to buy shares from Facebook or Amazon with 1,000 euros.

It should be noted that high investment amounts naturally reduce relative costs.

Every share purchase and sale causes order fees, which must be taken into account in advance. That means, before investing in stocks, the broker comparison should find out what fees are charged.

Experts recommend investing no less than € 1,000 in a public company. If this sum is too high or sometimes does not even have such a large fortune, you should look for an alternative.

Important: If you want to invest in stocks, you should never take out a loanThere is always insider information on the Internet about which papers will shoot up in the near future, but you have to be careful here – most of the reports are fictitious.  

You should also be careful when you land on websites that report promising strategies. Of course, there are strategies with which you can certainly achieve high profits – but there is no strategy with which you can always celebrate success.

In the end, it is important that only that amount is invested that you can actually afford. So it should be a sum that is at your disposal and which, as hard as it may sound now, may be lost.

Because of course, the market can move in the other direction so that you suffer a loss. It is also important that only that amount is invested that will not be accessed in the next few months (or sometimes years). So there is no need to sell during bad stock market times – you can wait for any price drops, so you don’t have to part with your papers at a bad time.

As already mentioned: If you find that you do not have enough money to invest in stocks, it is advisable to consider alternatives. The so-called savings plan is particularly recommended here.

What is a savings plan?
Here you can start with very small amounts, such as 10 euros, 20 euros or 50 euros/month, and thus build up a small fortune as a private investor. Another point in favor of savings plans is the fact that you don’t even have to pay attention to the right time. Due to the fact that the money is distributed over a very long period of time, you buy the shares at an average price. You always buy at the same price – sometimes cheap, then expensive. The so-called cost average effect makes it possible in the end to get a handsome return that would not have been possible with other products – such as overnight or fixed deposits.

The stock exchange can therefore not only be recommended to those investors who want to invest a lot of money – even small amounts can be mixed in.

Variant number 1: ETF savings plans

One option that should not be neglected is the ETF savings plan. In this case, you invest in stocks – and with really small sums. So you can already use the savings plan with 25 euros/month.

What are ETFs?

The abbreviation ETF stands for “Exchange Traded Fund” – translated: exchange-traded index fund. ETFs, therefore, belong to the fund category. Several investors invest their capital, which is subsequently invested in securities.

If it is a classic fund that is actively managed, the fund manager takes care of various investments. The investor, therefore, gives his money to a person who then invests and pursues the goal of increasing the money. If you look at funds, you will come to the conclusion relatively quickly that there are extremely many different types of funds – for example referring to

  • Industry sectors,
  • Regions and/or
  • various securities.

However, due to the fact that the money invested is widely distributed, the risk of loss is relatively low.

But if you choose an exchange-traded index fund, it has very little in common with the actively managed investment fund. An ETF is managed passively. That means there is no fund manager here who wants to win against the market – that is, a return higher than the average return.

The exchange-traded index fund is only a replica of a stock market index selected in advanceThe fund company takes the investor’s money and invests it in the securities that are in the selected index. Anyone who chooses the DAX, i.e. the leading German index, will subsequently only invest in those 30 public companies that are also included in the DAX. If the DAX rises, so does the invested assets. If the DAX falls, there is a loss. 

Goal: So it can be stated as a goal that exactly the return that the index also achieves should be achieved. So it’s not about wanting to win against the market – you just want to be just as good.
  • An advantage that should not be neglected here is the very low fees.

If you choose the ETF strategy, you have to pay far fewer costs than when investing in a classic fund:

Type of fee Passively managed funds (ETFs) Actively managed funds
Running costs 0.2 percent and 0.5 percent / year an average of 1.5 percent/year
acquisition cost 0.25 percent 5 percent
Profit-sharing no maximum 20 percent of the annual return

The savings plan

Here the name already says it all: A savings plan is a “plan” that automatically saves – that is, whoever decides to buy a security, in this case, a stock exchange-traded index fund, purchases month after month.

With a standing order, shares are bought monthly through the bank or broker.

Such savings plans can not only be served with small sums but are also extremely flexible and can be changed at any time.

Risks and opportunities

If you look at the risk, it must be said that this is based on the daily price fluctuations in the market. However, due to the fact that the money in ETFs is more widely distributed, so there is good diversification, you can actually rule out a total loss.  

If you have a long investment horizon, you can certainly achieve an attractive average return.

Variant number 2: grant personal loans

An interesting variant is personal loans, which can also be referred to as so-called P2P loans.

What are personal loans?

A very simple principle is used for personal loans – you take on the role of lender and lend money to a person who then becomes a borrower. The borrowed money is then repaid in installments over a certain point in time – including interest.

There are a few platforms on the internet today that connect private lenders and private borrowers. A potential borrower presents his or her loan request and what he wants to use the money for. The private donor then decides whether or not to support the project.

  • The advantage is that you do not have to provide the entire amount that the borrower wants – in the end, only a small part can be made available. This means that a loan can also be granted by several people.

If a transaction has been concluded, so the financing has been granted to the private borrower, he will – as contractually agreed – repay the loan.

Risks and opportunities

An advantage is a fact that the platforms through which loans are granted are designed to be extremely user-friendly – even beginners who have never had anything to do with the matter are not faced with any major difficulties here.

Of course, it must be mentioned at this point that – as with any other investment – defaults can also threaten here. Above all, because there are many potential borrowers who are only on such a platform because they no longer get any financing from the banks.

For this reason, it is important that you carefully consider in advance whether you want to support the loan request or not.

 

The best-known P2P credit brokers include the platforms:

  • Smava,
  • aux money,
  • Lendico,
  • Giromatch,
  • Funding Circle or also
  • Crossland.

Variant number 3: real estate crowd investing

Crowdinvesting can certainly be compared to personal loans. The difference? You invest in large real estate projects. The investor then earns from the fixed interest.

What is a crowd investing?

Here, too, various platforms are available on the Internet that offers the opportunity to invest in various real estate projects. As a rule, the projects are quite large as well as well-known. If you want to work with your money as a supporter, which is about getting interested in the income, it is important to deal with the various projects in advance. Which are particularly promising and which projects should you avoid?

Here, too, it is true that high-interest rates are naturally attractive, but they also mean that one is taking a higher risk as an investor.

Risks and opportunities

Anyone who chooses crowd investing must, of course, know that there is also a risk that should not be underestimated. A total loss can never be completely ruled out – if the project partner files for bankruptcy, the money is gone (in almost all cases). 

 

What is interesting, however, is the fact that you can also invest here with very small amounts.

The most popular platforms include:

  • Export or too
  • Mountain prince.

How to become and remain a successful investor

If the following points are taken into account, you are definitely on the right track to become a successful investor – and ultimately to remain so.

  • You have to understand the difference between consuming and investing.
  • You should know what is being invested in – “blind investments” are dangerous; In the end, it’s not about “red” or “black” in the casino, but about being successful with the right strategy.
  • It is important that you also invest in your own education – you should, therefore, deal with the various further training options, some of which are also offered on the platforms of the online brokers.
  • You have to have fun – if you are constantly scared and cramped, you will not be able to celebrate success.
  • Gain experience – at the beginning it’s about the experience; Those who see themselves as experienced investors can sometimes put more money into riskier products.

I hope you enjoy this article for more information about what are the best Online investment options for beginners to keep visiting Nouman Kaleem

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