While it is common to see investing instruments and materials accessible to finance professionals, one should not underestimate the importance and variety of opportunities for individual investors.
Why invest at all?
Bank savings accounts are a bad idea
Money insurance is generally limited to 100.000 EUR (wiki: Deposit Insurance).
In a “economically stable” part of EU, typical yield for saving accounts is around 1% per year.
Minus tax on that, minus inflation, and you are loosing your money, while banks use your deposit (using government guaranty) for increasing their wealth.
Bank investment accounts are a bad idea
Nothing is free. Banks often lease a trading platform, and re-sell it to you as “investment product”. Consider administration and transaction fees, minus taxes.
Pension funds are bad for your money
An average pension fund yields around 6% per year, minus administration fees.
With a catch: you have no control over your money.
Some of pension funds provide “Investment products”, which is nothing more then yet another marketing trick:
- selection of assets is very limited (probably hand-picked by some internal advisers)
- selection of brokerage house is not possible
- minus higher administration and transaction fees
Turn your savings into salary supplement or replacement
Why? Cause anyone can do it. And the earlier you start, the better.
Consider three behavioural profiles for an investor:
- Fixed income - is about dividends, that are regularly paid out by the companies whom you lend your capital.
- Capital growth - is about value investing so that your capital appreciates in value over time, on top on inflation.
- Capital preservation - is about keeping your capital in line with inflation, by carefully avoiding losses and not taking risk.