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What to know when you are just starting to invest


By Bitpanda

If you want to start investing, there are a few things to consider. In this article you will learn how to prepare to invest, how to proceed step-by-step and how to organise your private finances.

Do you get that queasy feeling in your stomach when you hear the words "private finances"? If you're anxious about money and associate it with uncertainty or worries, rest assured that you are not alone, it triggers unease in many people.

Your feelings about money

If you are thinking about investing and putting your money to work, you have most likely already discovered and gone through quite a number of articles about investing and personal finance and investment videos on numerous online investment platforms.

A wealth of information being available surrounding money management and financial freedom has moved investing into the spotlight. Even if the terms "feelings" and "money" are not usually used in the same sentence, they do belong together and this association should optimally be positive. But how do you achieve feeling good when money is involved?

You know the situation: after reading an interesting article or watching an inspirational video, you can feel really pumped and ready to get your finances on track. But then you read another article and watch another video. Gradually, you feel that self-doubt creeping up. You start feeling discouraged and frustrated because you're not as financially successful or knowledgeable as someone you don't even know, which saps your drive to tackle things.

The fact is: for many, sufficient funds and the infrastructure they need to start investing on a large scale are not easily available. Also, where do you start with the fundamentals of investing? Detailed instructions and complex expert articles about money investment for long-time experts are a dime a dozen on the net but what about for beginners?

1. Be patient and kind to yourself

When you read, watch or listen about investing and making money, always keep in mind that financial success rarely happens overnight. This fact cannot be stressed enough. Don’t forget, no matter the personal circumstances and backgrounds of financially successful people: really, every single one of them started planning their personal finances at one point. Some of them had support in doing so, others managed it on their own. If you manage to look at your finances from this perspective, there are two ways you can go forward.

If you are still feeling insecure, you can make a conscious decision to keep following posts about personal finance and money for the time being simply out of personal interest and just keep learning for a while. If you are feeling ready and have almost made up your mind to invest, you can start to actually act and begin research that is relevant for your personal situation.

If the struggle with feelings about a lack of funds is more than real for you or you are actually in really difficult personal circumstances, you should be especially patient with yourself. A change in your mindset and solving such a situation are part of an active process.

This is a journey that happens step-by-step, not overnight. It helps to know that almost everyone has made financial decisions that they regretted afterwards. Don’t forget that you almost always have the chance to turn the tide to really take your private finances into your own hands and to shape your financial future.

2. Taking your first steps

If you have decided to take the first step and to approach money from a new angle: congratulations! This is the perfect time for you. Before you start analysing your situation and calculating, try to define why managing your personal finances is important to you personally and what your priorities are.

Once you have figured out your motivation, take a look at your income and expenses in more detail and create or revise your household budget. Now you are finally ready to really get started: by preparing for unexpected expenses. Plus, don't forget: no matter what your personal financial situation is right now, you can actually start saving and investing with an amount starting from EUR 1 (yes, just one euro).

3. Learning about the basics of personal finance

Once you feel that you've established a household budget that really works for your individual situation and you have started planning for unexpected expenses, you are ready to learn the basics of personal finance.

Here are some questions for you: Why do you want to invest money in the first place? How can you budget money for investing? Why are interest and compound interest - the price of borrowing and lending money - and inflation - the decline in the purchasing power of your money - important when you invest?

4. Discover the asset you love

Yes, you get to pick your favourite investment product. First, figure out what kind of products appeal the most to you before you start investing. From individual stocks over exchange-traded funds (an ETF) and mutual funds to a variety of complex products for experienced investors and traders, and volatile assets such as cryptocurrencies, the number of available products is constantly growing.

Do your research on how to actually earn income from investing (for example with dividends) and understand why it's good to invest your money across multiple investment products rather than putting all your eggs in one basket. Finally, the topic that causes discomfort to many: what are the risks of investing you should be aware of? And what is the relationship between risk and profit?

5. Don’t forget the details

Now that you know your options, don’t forget the important details. Think about which products are really suitable for you and your personal situation. How much disposable income do you want to put aside for investing? Are you anticipating great changes in the way you are living coming up any time soon? When might you be needing liquid funds?

Also, make sure not to forget fees and taxable events associated with your investments when you are re-allocating your assets. Finally, how much time can you and do you want to devote to your investments - apart from your research, which is essential?

Start investing

Are you ready to start investing? Bitpanda makes it easy for you. Download the Bitpanda mobile app for iOS or Android on your smartphone to register. Verify your Bitpanda account in just a few minutes with one of our trusted verification providers, choose the payment option you prefer, and deposit your starting balance - you'll be able to buy, sell, and trade various assets, such Bitpanda Stocks*, crypto, and precious metals 24/7. You can create your Bitpanda account here.

*Bitpanda Stocks enables investing in fractional stocks. Fractional stocks in Europe are always enabled via a contract which replicates the underlying stock or ETF (financial instruments pursuant to section 1 item 7 lit. d WAG 2018). Investing in stocks and ETFs carries risks. For more details see the prospectus at bitpanda.com.