I am a beginner in investing. What are my options?

Date
29.03.2021
Read time

3 minutes

Author

Editorial Invest in Slovakia

Many people still think that investing is only for the rich. While this was still true to some extent 10 years ago, the barriers to entry into the investment market are now gone and investment opportunities are now open to all. Today, we will look together at investments that are suitable for beginner investors.

Investing is a great way to to expand your wealth and increase the so-called NET WORTH, i.e. the net asset value. The good news is that there are currently a number of investments available that are suitable for beginners, from which you can you really only need to select.

The most popular investments for beginners include retirement pension savings (second pillar), various investment applications such as eToro or Lynx, further investing in mixed and index funds with the help of your banker and also investments in ETF funds Exchange-traded funds.

And it is the last mentioned ones that are the most interesting for us from the perspective of an investor - a newcomer.

What is an ETF?

An ETF is a fund that replicates an underlying asset, usually an index fund, thus following its price development. Why not buy an index fund straight away, you ask? And this question is, of course, spot on.

Unlike an index fund, an ETF fund is passively managed fund, thereby requiring lower annual fees for holding it in the portfolio. It also removes the barrier to entry as is negotiable from small amounts. To buy an index fund, you need to prepare at least a few thousand euros as a one-off initial investment.

Last but not least, the advantage of ETF funds is their significantly low risk with the prospect of a few percent appreciation each year, at around 7 %. Finally, as the world's greatest investor himself, Warren Buffett, said: "By investing regularly in an index fund, an investor who knows nothing can outperform most investment professionals."

The underlying ETF is a fund that tracks the S&P 500, the most prominent index, called SPDR S&P 500 ETF, ticker SPY, founded in 1993.

Why invest in ETFs

Trading ETFs brings with it a number of benefits. In addition to those already mentioned in the article (lower management fees, low initial investment), these include:

  • Portfolio diversification

Portfolio diversification is extremely important for any investor, as significantly reduces investment risk. That is why ETFs are also a big attraction for investors. By buying an ETF fund, an investor can buy shares instead of individual stocks. a whole basket of shares, which in practice means that any losses of some stocks will be easily covered and outweighed by the gains of others.

  • High quality

Because the ETF Fund virtually replicates the world's most successful index funds, you can count on the quality of the individual stocks in the ETF fund is the highest possible. For example, in the aforementioned SPDR S&P 500 ETF (SPY), you will find stocks of the 500 largest US companies, including brands that you are surely familiar with, such as Apple, Microsoft, Amazon, Tesla, or Facebook.

  • High liquidity

Last but not least, a big advantage of investing in ETFs is their liquidity in the event of, if you need to get to your invested capital quickly. Since the price of an ETF fund is constantly changing throughout the trading day, you as an investor can buy and sell ETF funds at any time during the trading hours of the ETF fund.

That's it for today's article. Would you be interested in more detail other types of investments suitable for beginners? Let us know and continue to follow us for educational articles from the world of investing.

*Did you find an error? Email us at [email protected]

About the author
Editorial Invest in Slovakia
The Invest in Slovakia crowdfunding platform facilitates investments in Slovak real estate projects to investors from all over Europe. It focuses on innovative solutions with benefits for the surrounding area. The long-term effort of the team of specialists is the development of financial literacy. It provides clients with access to thoroughly vetted assets with different appreciation strategies.

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