Table of Contents
Why invest?
Benefits of investing
Disadvantages of short-term investing
Where to invest today without risk?
Paid accounts
Term deposits
Fixed income from serious states
What are expected to be the best investments in 2021?
Best options to invest
Where to invest 5,000 euros
Where to invest 10,000 euros
Where to invest 100,000 euros
Why invest?
Investing is practically an obligation in these times (it always was, but today, even more so).
Here are the main reasons why you should invest :
Protect yourself from inflation : The first reason is to protect yourself from inflation. In these times, you lose money every day that passes (until a few months ago, this was not the case, but now it is). Investing will allow you not to lose purchasing power with each passing day.
Putting your money to work : Another reason why it is important to invest is that it allows you to put your money to work. By doing so, you can make your money grow day by day without having to be present. Sounds good, right?
Having security : On the other hand, investing allows you to have security for the future. You never know what might happen in the next few years. Therefore, having money saved and invested (preferably in liquid assets) is a good idea to be protected against what may come.
Supplementing your pensions : Finally, a good reason to invest is to supplement your pensions . In Spain, it is highly probable that there will not be good pensions in a few years. Therefore, everyone must take responsibility for their future, invest and obtain some income to supplement their pension.
Generally, these are the four main reasons why people invest their money. And, as you can see, they are not small reasons. They are good reasons to invest.
Benefits of investing
In addition to reasons for investing, we can also talk about the benefits of investing, since it is not exactly the same thing. Below, we mention the main benefits of investing :
Grow your wealth : The first benefit of investing, of course, is that your wealth grows. And we all like to see our wealth grow , don't we? Investing your money can allow you to grow your wealth at a rate of around 6% on average, so it's a very good growth rate for your capital.
You learn more about the world : When you invest, you have to start to take an interest in many topics that you didn't consider before (geopolitics, economics, finances, etc.). All of this rich people phone number data allows you to get to know the world better, because you force yourself to learn about it. This is another benefit (although it doesn't always happen, it depends on the type of investment you want to make).
You learn more about yourself : Another benefit of investing is that it allows you to learn more about yourself. After all, investing puts you in front of a mirror and forces you to understand your personality and your psychology . So, when you invest, you get to know yourself better and discover how you handle yourself under pressure, how you react when things go well for you, etc.
You take better care of your family : Obviously, another benefit of investing is that it allows you to take better care of your family, because you have a larger asset with which to deal with any problem that may arise. And, in fact, you can leave that asset as an inheritance to your wife and children.
You protect yourself : Another key point, which is related to what we mentioned in the previous section. Investing allows you to be protected against the future, which, by definition, is unpredictable and uncertain. Investing allows you to have a more robust position against this unpredictability.
You build a better society : Finally, when you invest, you build a better society , because you contribute to capitalizing companies, and that has a positive impact on them, which, in turn, can invest more and hire more people... It's the virtuous circle of investment!
However, all of the above is true with one caveat: It is only applicable when we invest in the long term. If we invest in the short term, not only will we not have those benefits, but we will also have serious risks. We will discuss this in the next section.
Disadvantages of short-term investing
Below we list the main drawbacks of short-term investing (reasons why we do not recommend short-term investing):
The market is unpredictable in the short term : The market is reasonably predictable in the long term, but in the short term, it is completely irrational. You have no way of knowing what it will do. This is why you are much more likely to lose money trading in the short term than in the long term.
You can lose your capital : As a result of the above, the risk of losing your capital increases, either totally or partially. And it is true that you can always wait for the price to recover. But in that case… why are you not investing from the beginning for the long term?
You are subject to fears and euphoria : Of course, when trading short, you are much more subject to and a greater victim of the fears and euphoria that move the market. In the long term, the market tends to be rational. But in the short term, it is completely irrational, and any unfounded fear or vain hope can cause the price of an asset to fluctuate.
Stress : Finally, keeping track of all the things we have mentioned in the previous points is stressful. And when we invest, we want to improve our quality of life, not worsen it. Therefore, trying to invest in the short term is not a good idea, because it can negatively affect our health.
So, as you can see, you have good reasons not to invest in the short term but to invest in the long term . That is what we recommend and what we will base the recommendations in the following sections on.
Download 7 long-term profitable investments
Where to invest today without risk?
If you are wondering where you can safely invest your savings without risk , we must tell you that the options are limited. In the world of investment, there is an unquestionable binomial, and it is the risk-return binomial.
In general, the higher the risk, the higher the return (or, rather, the higher the volatility, the higher the return).
That is why, if you want to invest with low volatility, you must accept rather low or even zero returns. However, we are going to mention the best investments with low volatility. They are the following:
Paid accounts
First of all, you have the remunerated accounts . This is the least volatile and least risky option, because it allows you to always have your money available and you know in advance what profitability you will get.
The problem, of course, is that the returns are very low. The best interest-bearing accounts barely achieve a 1% return. Often, they don't even cover inflation.
Term deposits
Then there are term deposits , which are also insured and you know in advance the return you will obtain, but access to the capital is not so easy, because you have to leave it in the deposit for the period stipulated in the contract.
That's why it pays a little more, but it's rare to achieve more than 2.5% profitability. This is very little, especially if you take into account that the historical average inflation is 2%. You end up earning barely 2.5%.
Fixed income from serious states
The last low-volatility investment is fixed income from serious countries, such as Switzerland, Germany or Norway , to name a few examples. In this case, you are not guaranteed a return, but it is unlikely that you will not get one. And you also know this in advance.
However, fixed-income is currently yielding very little, and you would barely surpass the profitability obtained from term deposits. That is why it is not a great idea.
What are expected to be the best investments in 2021?
There are two major investments that are expected to be highly profitable throughout 2021: Cryptocurrencies and equities . However, you should keep in mind that this does not mean that it is the right type of investment for you.
Each person has their own investor profile and it is advisable not to invest in something that is not understood or that does not fit the investor's risk profile .
That said, cryptocurrencies are expected to continue their upward trend , taking advantage of the last halving that Bitcoin had and that pushed the price of the most famous cryptocurrency. Although it is a very volatile investment.
Equity is also continuing to rise , and is expected to continue to do so, fuelled by the stimulus plans in both the US and Europe. Therefore, there are no expectations of any falls in the stock market in the coming months.
Of course, this is pure speculation. No one knows the future. These are predictions that may or may not come true. You should keep that in mind before making a decision.
Index Funds Investment Guide
Best options to invest
Having clarified the above, it is worth mentioning that, if you are asking yourself “ what can I invest in now ”, you have different options, depending on your available capital and your time frame. Let's look at some possibilities according to different levels of capital:
Where to invest 5,000 euros
If you have €5,000, the first thing you need to understand is that it's not a very large amount of money. It may seem like that to you (maybe because you're young, maybe because you find it hard to save), but it's not a huge amount of money.
In this sense, you must understand that the profitability in absolute terms that you will obtain will not be very high.
Despite this, you have good investment options and, over time, that capital will grow in an interesting way.
What options are the most recommended?
Well, basically, investment funds and ETFs . And, within these, the best option will be indexed investment funds, where you can choose between a portfolio of index funds or normal ETFs or choose an investment with Value or SRI styles (the latter, in addition to benefiting your pocket, would especially benefit the planet).
With these levels of capital, you don't want to invest in anything more complicated. Simply a diversified portfolio indexed to several indices and wait for the capital to grow due to the effect of compound interest .
