Investor’s priority pyramid

Investor priorities must be clear to be successful

Starters very often invest by chance or without an organized plan: they put money in a fund, they buy stocks of a previously recommended company or from a company  they like or, in the worst cases, they buy a bank’s preferred shares because someone has convinced them ( hopefully it will not be the case of any of our readers).

There could be savers that confuse investing money with setting money aside for a short-term purpose: no one should invest money they might need to have handy in the short term.

Sometimes, although this last constraint is clear, decisions are prioritized in a not very advisable order.

Let’s take taxes as an example, many investors rush to invest impulsively in mutual funds due to its tax advantages and don’t stop to think of other aspects that could meet their needs:

-Are these tools compared with other assets, the best way to obtain reasonable returns?

-Are the costs reasonable?

-Its composition fits our tolerance to risk?

Inbestme’s Scope:

All in all, there are many aspects to take under consideration. If we now place them in a pyramid where the most important factor is in the base of the figure, this would be our proposal:

In other words, this means that those are the activities in which we should prioritize our first decisions or in which we should train ourselves if we want to manage our investments. However, there is no point on being smart selecting certain companies; if in the end our emotions continue to condition us to commit the worst of the sins: sell when market is cheap and buy when it is expensive.

Or what good does it do to worry about taxes, if we haven’t got reasonable returns that fit our risk profile, after a correct asset allocation and without management costs that greatly affect our benefits?

Therefore, it is important to make sure that the solution we take conveniently prioritizes each of these components. This pyramid could vary, for example: for small savers we could find that management costs are in the lower part of the priorities pyramid due to the impact that these costs have on a small portfolio (especially to the fixed portion). Thus, it becomes necessary to find a low cost service.

If you have your financial needs and objectives clear and you want to take your first steps in the world of investments, our diversified portfolios are an excellent way to begin because they are built taking into account most of the priorities.

Know your investment profile and start to invest with us as soon as possible. Time is the best ally for disciplined investors. Inbestme combines optimal portfolios with ETFs from different asset types and markets. You can now become a successful investor with only 10,000 €.

Index funds, etfs and pension plans

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