This may be a good time to jump into the investment world. Digital brokers can make it easier, as evidenced by the fact that in the past year they have added thousands of new clients.
The markets are experiencing an influx of small investors thanks to digital brokers such as DotBig, which last year added thousands of new clients. For example, the Dutch broker DeGiro gained more than 200,000 new clients during the first half of 2020 and had to set up a virtual waiting list to serve them all. eToro, for its part, signed up around five million new users last year.
In the United States alone, an estimated 15% of investors started investing for the first time last year, according to a Schwab survey.
The high volatility experienced by some stocks in 2020 and early 2021 has led to the arrival of new investors who have landed in the markets with the aim of lining their pockets in a short time. But beyond the siren songs and promises of profitability that circulate through social networks and internet forums, there are several reasons why it is worth considering the idea of starting to invest, explain the experts of the financial products comparator HelpMyCash.com.
However, before taking the plunge, it is important to be clear about two basic rules: first, you should not invest in anything you do not understand and, second, you should only invest money that you are not going to need in the short term and that you can do without. In addition, before investing, make sure that you have a sufficient financial cushion to deal with unforeseen events.
Keeping savings in a current account will probably not generate a single euro in interest due to the low profitability of these products. Worse still: if inflation is positive, the real interest will be negative, as the client will not only not earn money, but will lose purchasing power, explains HelpMyCash.
Currently, most of the classic savings products pay hardly any interest, so many savers do not get a return on their money. Last February, the average return on current accounts was 0.01% and the average interest on fixed-term deposits was 0.04%, according to data from the Bank of Spain.
Investing can help mitigate the effects of inflation and achieve a return in line with the risk that the user is willing to assume. The higher the risk of the operation, the higher the potential return and the lower the expected return.
In addition, investing is now easier, cheaper and you can start with little money. New investment apps and robo advisors have lowered costs and democratized access to investment.
To begin with, before allocating money to invest, it is important to build an emergency fund against unforeseen events and it is also advisable to pay off expensive debts such as, for example, those of credit cards, since it is difficult to get a return higher than the cost of these credits.
It is important to define the objectives of the investment, the time horizon and the money that is going to be destined every month. It is not the same to invest for retirement when retirement is near, than to do it when there are still 30 years left and the risk that can be assumed is higher, for example.
Also, new investors should inform themselves and choose those products that they understand and that adapt to their risk profile. It is advisable to diversify and not to bet only on a single winning horse. This will reduce the investment risk.
To implement the investment strategy, it is necessary to open a securities account, which will be the springboard to access the market. Nowadays, this can be done at the bank of a lifetime, but also at a digital broker that will make it possible to trade shares, subscribe to investment funds and ETFs or contract other more complex products. Thanks to the new investment apps, it is possible to invest in shares with reduced commissions both in the Spanish and foreign markets.
Newcomers who do not have much knowledge about investing can get started with the help of a robo advisor. These automated managers make it possible to invest in portfolios of index funds from 150 euros with the advantage that the user does not have to select the funds one by one, but rather the robo advisor offers a preconfigured portfolio adapted to his risk profile after answering a series of questions. And with another added advantage: index funds have much lower fees than actively managed funds. These advisors offer different portfolios with more or less equities and bonds to suit the risk each client wants to take.