The topics of investment, asset accumulation and old-age provision are ubiquitously relevant. With interest rates on the rise, many investors are forced to rethink their asset-building strategy. The recent discussion about the poor means of the statutory pension insurance, which for many predetermine old-age poverty mean, give rise to more in-depth attention to financial products and investment forms.
Principles of investment and rules for asset accumulation
Regardless of which investment type an investor is counting on, every responsible saver should know and consider some important rules and principles in order to be successful in asset accumulation:
- Debt settlement is a top priority
- Successful asset accumulation requires thorough planning
- Pursue a long-term and consistent plan
- Distribute savings on different investment forms to minimize the risk of loss
- Keep an eye on the entire portfolio for every investment decision
- Pay attention to the interplay between return and risk
- Long-term investments prefer
- Pay attention to the costs of the investment forms
A new car, the dream of your own home or retirement – there are many reasons to save.
Debt settlement: the most effective form of investment
A new car, the dream of your own home or retirement – there are many reasons to save. Nevertheless, anyone who wants to save systematically and regularly repay part of their income should first repay their debts. It is more advantageous to use an inheritance or a one-time payment from his employer to replace existing loans or to compensate for the credit line than to invest the money. In general, the interest rates on loans are significantly higher than the return that can be earned with an investment.
Saving requires a high degree of self-discipline. Anyone who plans his asset accumulation and proceeds systematically will find it easier to reach his savings target. Experience shows that the savers, who act according to plan, react more calmly in the event of violent price fluctuations and are better protected against panic-related misbehavior.
Diversification: The A and O at the investment
The best financial experts can not predict how an investment will develop in the future. Economic development is determined by the interplay of many factors that can not be calculated even with complex models. In addition, sometimes political events have a dramatic impact on the price of stocks, bonds, currencies or commodity prices. To compensate for such fluctuations and minimize the risk of loss, investors should invest their savings as widely as possible . In the financial world, this diversification of invested money into various forms of investment is called diversification. Anyone who invests scattered money can compensate for losses on an investment with profits from other investment forms.
Relationship between investment duration and investment performance
Experience shows that long-term oriented investors are the most successful. Therefore, anyone who wants to build a financial cushion for old age, as early as possible to start retirement . Over many years, short-term price fluctuations play a subordinate role. In addition, many investors underestimate the positive impact of the compounding effect , which significantly increases the return on long-term investments.
Often ignored: The cost of investing
Every form of investment causes costs. When buying and selling shares and other securities, transaction costs, fees and sometimes brokerage commissions are due. In addition, owners of securities need a deposit for which the financial institution collects custody fees. Shareholders of funds will not only participate in the profits generated, but also in the costs of managing the assets. Many investors are interested in gold to safely invest savings. Those who buy physical gold must keep in mind that safekeeping entails the cost of a safe deposit box or the purchase of a safe.
The costs incurred must be carefully considered when planning your investment because they reduce the return on the investment.
The main criteria of investment for asset accumulation:
Risk, security, availability
After all, the financial market offers a wealth of products that should be used differently depending on the individual situation. In any case, when wealth is accumulated, never put everything on one card.
An effective asset accumulation can only be achieved through a sensible mix of risk, security and availability.
How the weighting of the individual shares in the individual investment portfolio should turn out, however, is determined by the initial situation of the individual saver and, of course, the type of investor.