Hey, we have some cookies
By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Cookie Statement for more information.

Why start investing and how

April 26, 2023

Investing your money can be a great way to grow your wealth and achieve your financial goals. However, many people are intimidated by the world of investing and don't know where to start. In this post, we'll show you how and why you should start investing, even on a budget.

Why Invest?

Investing your money can offer several benefits, including:

Growing Your Wealth

By investing your money, you have the potential to earn higher returns than you would with a savings account or other low-risk investments. Over time, your money can compound and grow significantly.

Achieving Your Financial Goals

Whether you want to save for retirement, buy a house, or fund your children's education, investing can help you reach your goals. By starting early and consistently investing, you can build the wealth you need to achieve your dreams.

Beating Inflation

Inflation can erode the purchasing power of your money over time. Investing your money can help you stay ahead of inflation and protect your purchasing power.

Creating a Budget

Before you start investing, it's important to create a budget. A budget helps you understand your income and expenses and make sure you're living within your means. By tracking your spending and identifying areas where you can cut back, you can free up money to invest.

Track Your Spending

The first step to creating a budget is to track your spending. This can help you identify where your money is going and where you can cut back. You can use a spreadsheet or an app like Mint to track your spending.

Identify Your Expenses

Once you've tracked your spending, you can identify your expenses. Make a list of your monthly expenses, including rent/mortgage, utilities, groceries, transportation, and any other regular expenses.

Set a Savings Goal

Based on your income and expenses, set a savings goal for yourself. Ideally, you should aim to save at least 20% of your income each month. If that's not possible, start with a smaller percentage and gradually increase it over time.

Investing on a Budget

You don't need a lot of money to start investing. In fact, there are several ways to invest even on a tight budget.

Start Small

You don't need to invest thousands of dollars to start seeing returns. Many brokerage firms and investment apps allow you to start investing with as little as $10.

Use Your Employer's Retirement Plan

If your employer offers a 401(k) or other retirement plan, take advantage of it. These plans offer tax benefits and may even include a matching contribution from your employer.

Consider Low-Cost Index Funds

Instead of investing in individual stocks, consider investing in low-cost index funds. These funds track the performance of an index, such as the S&P 500, and offer diversification at a low cost.

Automate Your Investments

To make investing easier, consider automating your investments. Set up automatic contributions to your investment account each month so you don't have to remember to do it yourself.

Tips for Investing

Once you've started investing, there are several tips you can follow to make the most of your money.

Diversify Your Portfolio

It's important to diversify your portfolio by investing in a variety of stocks, bonds, and other securities. This can help reduce risk and protect your investments from market fluctuations.

Don't Panic During Market Downturns

The stock market can be volatile, and it's not uncommon to see drops in the value of your investments. It's important to stay calm and not panic during these downturns. In fact, market downturns can be a good time to buy more stocks at a lower price.

Keep an Eye on Fees

Fees are important to keep an eye on when investing because they can eat into your profits and impact your overall return on investment. Different investments come with different fees, and fees can compound over time. By choosing low-fee investment options and negotiating fees, you can keep more of your money and achieve your investment goals.

Things to Keep in Mind

Now that you understand the importance of investing and how to get started, let's talk about some tips to keep in mind as you begin your investing journey.

1. Understand Your Budget and Monthly Expenses

First and foremost, it's essential to have a solid understanding of your budget and your monthly expenses. Investing should never come at the expense of your essential expenses, such as rent, utilities, and groceries. So, before you start investing, it's vital to take a close look at your budget and see where you can cut back on spending. This will give you a better idea of how much money you can comfortably set aside for investing each month.

2. Determine Your Risk Tolerance

Another important factor to consider is risk tolerance. Everyone's risk tolerance is different, and it's essential to find a level of risk that you're comfortable with. If you're risk-averse, then you may want to consider more conservative investment options, such as bonds or mutual funds. However, if you're comfortable with more risk, you may want to explore options like individual stocks or exchange-traded funds (ETFs).

3. Diversify Your Portfolio

It's also crucial to diversify your portfolio. Investing in a variety of different assets can help spread your risk and protect your investments from market volatility. A well-diversified portfolio should include a mix of stocks, bonds, and other asset classes.

4. Stay Focused on Your Goals

Finally, don't let short-term fluctuations in the market discourage you. The stock market can be volatile, and it's not uncommon for prices to fluctuate in the short term. However, history has shown that over the long term, the stock market has always trended upward. So, if you're investing for the long term, it's essential to stay focused on your goals and not get caught up in short-term fluctuations.

Start investing

Investing is an essential part of building long-term wealth and achieving your financial goals. While getting started can be intimidating, there are many resources available to help you along the way. By following these tips and doing your research, you can start investing with confidence and set yourself up for a financially secure future.

And if you're looking for an easy and convenient way to start investing, look no further than bunq's Easy Investments feature. With just a few taps in the bunq app, you can start investing in a diverse range of funds, tailored to your risk profile and investment goals. So, what are you waiting for? Start investing today and take the first step towards achieving your financial dreams.

Share this post

Start your 30-day free trial 🚀

Open your account in just 5 minutes, directly from your smartphone.

Get started