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Investing for beginners: the five most frequently asked questions answered

More and more people invest: in 2020, the number of households that have money in shares or investment funds increased by 17 percent to 1.75 million. Not surprising when you consider that savings interest rates are getting lower and inflation is rising, making your savings worth less and less over the years.

Investing is no longer something you have to be rich for. With many games, including online, you can even start investing from a few tens. As a result, people in their twenties and thirties in particular have discovered investing in recent years. But investing wisely as a beginner, how do you do that? 5 most frequently asked questions answered. 

1. Can you invest with little money?

It starts with drawing up a strategy and then sticking to it, says Tom Brouwers. He is an investor coach at the Investment Institute, an organization that provides education for investors. Decide for yourself what you want and how much risk you are willing to take. That of course depends on your age and how much money you have available. Our golden rule is: transfer ten percent of your income to an investment account every month. If you do that all your life, you can make some serious money.”

So says Robin Seetz, product owner at a startup in daily life. He started a blog a year and a half ago to make money matters more accessible to young people. Seetz has been making the Spaarpodcast for a year now. “I opened an investment account in 2017 on the advice of my father. That works perfectly for me. An amount is automatically debited every month and I don’t have to worry about it anymore.”

2. Investing in individual stocks or ETFs?

Seetz does not actively buy shares in Apple or Philips, for example, and advises novice investors to do so. “That requires knowledge of the market, which you often don’t have yet. The discord stock price is found online. Rather invest an amount every month that you can miss in an index fund.” Such a fund (also known as an ETF or index tracker) consists of a composite package of shares, spread over a large collection of listed companies. Because you invest in many companies at the same time, you also spread your risk.

3. Which investment account should I choose?

There are all kinds of parties on the market where you can open an investment account to set up money to invest with. Do check whether they are registered with the Dutch Central Bank, so that you know that they are reliable, advises Brouwers. “And don’t fall for organizations that promise extremely high returns, those are precisely the parties where you will get wet.”

With that crypto hype, I saw that people thought: “Shit, I could have made a fortune with a few euros.” But that only happens to a few

Tom Brouwers, Investment Institute

When you open an investment account, you need to determine the ratio in which you want to put your money into stocks and government bonds. If you buy a government bond, you are actually lending money to a national bank. Because you are guaranteed to get this back, government bonds are often seen as a safer choice than shares.

However, according to Brouwers, it is questionable whether that is really the case. “The interest rates on bonds are very low, sometimes even negative. I would recommend, especially in your first year when you don’t have that much to lose, just invest ‘offensively’, i.e. in index ETFs.”

4. Stocks or crypto?

Investing, especially when you are young, is something you do for the long term, emphasizes Brouwers. You should not go for the fast bangers. “With that crypto hype, I also saw people thinking: ‘Shit, I could have made a fortune with a few euros.’ But that only happens to a few. It is better to focus on getting a few percent return every year.”

5. Short or long term investing?

Then it is only important to put your money aside for a longer period of time. Brouwers recommends a minimum of fifteen to twenty years. This has everything to do with the return-on-return effect. This means that you earn a return on your previously earned profit. Brouwers calculates: “Suppose you invest 100 euros and have a return of 4 percent, then you have 104 euros. The following month you have another 4 percent return, but this time over 104 euros. And so it goes on.” After twenty years you have an egg amount of more than 36,000 euros, with 24,000 euros invested. Over time, the snowball effect becomes so great that Albert Einstein spoke of the eighth wonder of the world.

An advantage of investing for the long term is that you are not dependent on daily exchange rate changes and do not have to keep an eye on them. So you can turn off RTL Z again.

According to Seetz, you don’t have to install investment apps on your phone either. “Then you are only tempted to keep checking the stock market. Nowadays it is very easy to quickly buy a share via your phone. It is made very attractive. But actually you should appreciate the dullness. Invest a fixed amount monthly and be patient. That’s when you get the furthest as a novice investor.”