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    How to Invest Money: Tips on investing your money

     Tips on investing your money

    Before you have a conversation with a bank or financial advisor, you should clarify the following points for yourself

    • Your investment objectives
    • Your risk tolerance
    • The desired commitment period
    • Your return expectations

    Tips on investing your money
    Tips on investing your money 

    What does "investment objective" mean?

    It means being as specific as possible about the investment objective. Some examples: Are you planning your private retirement? Do you want to invest savings that are available daily? Do you want to renovate your apartment or buy a house in a few years? Do you want your children to be covered until they are of legal age? Etc.

    What "return" means

    It is the annual return to the capital invested (expressed as a percentage. An example: you invest 1000 euros. The return on this investment is 30 euros (after deducting capital gains tax). The return from what you will do is 30 euros: 1000 euros = 3%. What you are interested in is the return after deducting taxes and expenses. If, for example, you have to pay 5 euros for account management at the end of the year, your net return drops to 25 euros. In this case, its net return is only 2.5%.

    Risks when investing money

    Depending on the type of investment, some risks must be taken into account: company risk, market risk, interest rate risk, currency risk, exchange rate risk, and value fluctuation risk.

    "Zero risks" does not exist. Basically, the higher the (promised) return, the greater the risk. You should be aware of your own risk tolerance and the extent to which you can financially cope with losses or total loss of invested capital.

    Performance and risk

    Commitment period for investments

    The longer the money is immobilized, the greater the profitability of a savings and investment product. But beware: if you want to withdraw your money early, this usually leads to losses or even penalties. An example: premature cancellation of an estate and death insurance policy can be expensive.

    This is because the redemption values at the end of the policy may be lower than the premiums paid. Another example: the premature dissolution of a linked savings book will cost you advance interest. Therefore, in all investment products, it should be asked how quickly the capital will be available in case of need, and whether there are costs of termination of the contract.

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