The secret of investing is, finally, that there is no secret
Getting started with a new activity can seem tough and overwhelming. When referring to the world of investments, we find many different techniques that can appear especially complex if one does not have a basic knowledge of them. However, this is not a reason to back off from investing rather one should start investing as soon as possible.
It is important to first take care to cover basic needs as well as have a savings account for any unforeseen event that may occur in the next two to three years. A fundamental rule is to not use what we need in short-term because of volatility and the fact that markets will reward mid and long-term investments.
Once all those possible urgent needs are covered then it makes all the sense in the world to start investing. A portfolio with a medium risk profile will probably have an average return of 6%. This means we are able to double our assets every 12 years due to the “magic of compound interest”.
People can have second thoughts about investing and prefer to keep their savings in deposits. They might consider investing means to assume too much risk. The truth is that markets in the long run have a natural tendency to rise diluting the initial risk and disciplined investors have proven this time after time in history.
Having a well diversified portfolio can be a good solution and the safest way to invest. Don’t put all your eggs in one basket or “buy up the market” can become a mistake.
A significant part of our philosophy is based on the recommendations and guidance John Bogle (Vanguard’s creator) explains in his book “Common Sense on Mutual Funds”. Summarizing his way of thinking:
“Actually, the secret of investing is, finally, that there is no secret”
It is as easy as following this roadmap:
Invest you must if we don’t want to miss the purchasing power of our savings due to inflation.
Time is your friend. The sooner we start the better. Investing regularly is a guarantee of success in our investments.
Impulse is your enemy. Emotions must be disregarded. Make a rational plan with reasonable expectations. Markets can experience bad times which can be followed with moments of recovery. The upward trend of the market guarantees a return in the long run.
Low cost makes your task easier. Keep your investment costs and fees at bay is the best guarantee for obtaining additional returns.
Stick to simplicity. Don’t over complicate your investment process. With just a few assets you can get a good diversification while balancing the risk.
Stay on course. No matter what happens. Carrying on with your plan is a key to success.
Remember it is important to keep in mind to never invest money you might need handy in a short-term. If you feel like you don’t have enough experience as an investor try to find a good financial advisor.
Find out more about our philosophy and recommendations here. You will find more information that can be sorted by categories depending on the topic. We highly recommend that you continue and that your next task is the definition of your investment priorities.
Furthermore, our philosophy has an implicit long-term vision. In fact one good choice for an investor would be buying a minimum of thirty companies and holding them as long as they maintain their competitive advantages. In order to do this you must have a minimum capital that will allow for this kind of diversification.
To begin there are efficient and simpler options like our diversified portfolios starting at 10,000 €.
If you have decided to start investing, Inbestme is your online financial advisor. Get to know your investor profile and start investing now. We will help you take control of your finances.