When should we start with personal savings?

Investing Money: The 10 Best Tips for Investing

"It is better to think about your money for a day a month than to work for a whole month." This phrase is attributed to one of the richest people of all time, oil tycoon John D. Rockefeller.

Before starting your first investment, you should make a few basic considerations. Because it usually takes much longer to earn the money than to lose it in a bad investment. Investment decisions are often made hastily or too much trust is placed in the surefire stock tip of the neighbor. So that this does not happen to you, we would like to give you a few suggestions for a successful start in investing with this article. Before you start investing, consider the following points.

Tip # 1 - Set your goals and forge a plan

Investments should always be based on needs. Therefore, at the beginning of every investor career, there is always a goal. What do you want to achieve with your investment? Only knowing your goals can you choose the right investment tools.

The goals can be very different. Every goal has its justification. Be it saving for a home, an apprenticeship, or a vacation. The most important thing is that you know where you are going. You can only achieve them if you know your goals. Sounds logical right? Ask yourself the following questions about your investment goals:

  • What do I want to achieve with my investment?
  • What do I want to save for?
  • How many different goals do I have?
  • Are my goals realistic?

Tip # 2 - Set your investment horizon

It is important to know how long you want to tie up your money. Your goals are crucial for this. Investment horizon and investment goals correlate directly with one another. While the investment horizon for old-age provision may be 30 years, it may only be 12 months for vacation.

The investment horizon should have a significant impact on the choice of your type of investment. As a rule of thumb, you can take more risk with a longer investment horizon, as you can just sit out most crises and wait for better times.

Of course, age also influences the investment horizon. In retirement, it makes little sense to pursue a long-term investment strategy for the next 40 years. Of course, you can choose different investment horizons depending on your goal.

Ask yourself the following questions:

  • How long do I want to tie up my money?
  • When should my money be available?
  • How long can I do without my money?
  • How much life time do I have left statistically?

Tip # 3 - Be Aware of Your Risk Tolerance

Your personal risk tolerance should have a significant impact on your investment decision. Only if you stick with it and stick to your plan will you have long-term success in investing. The investor's greatest enemies are their own fear and excessive euphoria. The less emotional you are, the more rational you will be.

Realize how much risk you can take without getting restless. Strength lies in calm, especially when investing. Your own risk tolerance also depends on your age. Young people are more likely to take risks and should focus on wealth growth. As you get older, however, you should invest more securely and concentrate on preserving your wealth.

Possible questions could be:

  • Am I more of a conservative, security-conscious investor?
  • Are opportunities for returns more important to me than possible risks?
  • Can I cope with a (partial) loss of capital?
  • Can I bear price losses without getting restless?
  • How important is stable performance to me?
  • Am I young enough to be able to sit out potential years of crisis?

Tip # 4 - Pay Off Expensive Debt!

It makes little sense to immediately want to pay off the construction loan that is still running for 30 years. This is how you would never start investing as you would probably just be paying off the loan for the next several years.

However, you should pay off additional expensive loans before investing. These include, for example, credit card debt or consumer loans, the interest rates of which are often over 12 percent a year. In addition, you should ideally not use the overdraft facility of your checking account at all. Here, too, there are significant overdraft interest rates above 10 percent at many banks. So make sure you are even with your expensive creditors before you start investing. This gives you more freedom and the necessary leisure to successfully invest money with a clear head.

Tip No. 5 - Determine your personal savings amount

Before investing, make sure you know how much money you can put into your investment goals without worry. To do this, you have to compare income and expenses and see how much money you have available for free investment each month.

Feel free to set your savings amount a little lower. The most important thing is that you can keep it for the long term without getting into financial difficulties. Compound interest is your friend and investment is particularly successful in the long term. By the way: even a small introduction is worthwhile. With only 25 euros a month you can make private provisions for your old age. The sooner you start, the better.

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Tip # 6 - create an emergency reserve

Unexpected expenses can hit you at any time and put you in financial distress. Broken household appliances or car repairs in particular can quickly tear a hole in the household budget.

To avoid having to settle unexpected expenses by liquidating your investment portfolio, you should create an emergency reserve. If possible, you should save your living expenses for at least three to six months. Even if you are unemployed, you have some leeway to come up with something new.

To store the emergency reserve, you can choose flexible and safe investments such as overnight money. Please note, however, that the interest on a call money account is currently well below inflation. Most call money accounts have minimal interest or none at all. Then investments in fixed-term deposits with better interest rates are also an option, but this again comes at the expense of flexibility. A mixture of part of the deposits on a fixed-term deposit account and part of the deposits on a call money account is recommended.

Tip # 7 - start investing as early as possible

The earlier you start investing, the more you benefit from compound interest. Or dividends and reinvested income if you invest in stocks, ETFs, or mutual funds. Even if you only invest minimal amounts per month, the time factor increases your own return significantly. Getting started is almost always worthwhile, especially for young people, even if they only have small amounts available.

If you no longer feel very young yourself, it is still not too late to start investing. Some discover the stock market late and suddenly become heavy traders as retirees. Even if that is not a very recommendable strategy. After all, with no experience you can run into significant losses and burn your finances in no time at all.

Tip # 8 - Never bet everything on one card

Long-term success in investing depends less on spectacular coups than on a balanced and needs-based investment strategy. That is why you should never put everything into one investment when investing. Diversification is the keyword and means to distribute your own capital across different asset classes and values. So instead of investing 100 euros in a single share every month, you should choose a broadly diversified fund or invest 50 euros each in two different funds. These funds should invest differently and, if possible, not correlate with one another, i.e. not be mutually interrelated.

You should also diversify between asset classes. So, for example, don't just invest in stocks, but also in real estate, bonds, precious metals, raw materials or alternative investments. So you can put together a portfolio according to your personal needs and your own risk tolerance.

Tip # 9 - watch out for the cost!

Regardless of whether online or offline: in most cases you will not get around fees when investing. Therefore, always pay attention to the fees before investing. It is often worthwhile to choose the cheaper provider. As a rule, this is not the classic bank, but rather a direct bank or an online discounter. Many fund offers contain hidden costs such as the front-end load, transaction fees, custody fees and performance fees, which reduce the return accordingly. The differences between the individual providers are sometimes large.

The highest costs are usually incurred when redeploying and concluding a contract. For this reason, one or the other financial advisor is interested in keeping your portfolio and the various forms of investment moving.

ETFs are an inexpensive entry option. You have the advantage over conventional investment funds that you do not charge an issue surcharge or a performance fee. Only a management fee is billed annually. However, this is significantly below the fees of traditional investment funds with active fund managers.

Tip # 10 - Be aware of taxes and inflation

In addition to the administrative costs of the financial investments, there are also taxes and inflation! Note that you have to pay 25 percent capital gains tax plus solidarity surcharge (and possibly church tax) on your capital gains.

You also need to be aware of inflation. It reduces your effective return. On average by 2 percent annually. So be sure to check beforehand whether your investment compensates for inflation!


Keep these 10 tips in mind when investing. Then you are well on the way to turning small amounts into large fortunes.

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