Investing money can seem complicated, especially when you’re just starting out. This can cause concerns about risk and lack of knowledge. But don’t worry! With a well-thought-out strategy, investing is accessible to everyone – regardless of how much money you have or how well you know about finances.
Learn the basics of investing
Before you start investing, it’s a good idea to start by familiarizing yourself with the basics. Understanding how mutual funds work, how investing in bonds differs from investing in stocks, and basic concepts such as supply, demand, inflation, investment risk, diversification, and what investment is, will help you better understand the investment mechanisms. You can use publicly available educational materials, but also entries on our blog, which present the above concepts in an accessible way.
Define financial goals
Before you make your first investment, it’s important that you determine your financial goals. Do you want to save for retirement, for your child’s education, or just to protect your funds from inflation outflows? Setting your financial goals will allow you to:
Focus on the right types of investments. The wide range of Goldman Sachs TFI investment funds is tailored to different goals and risks. When choosing a fund from our offer, you can filter it by risk class, investment horizon or fund type (shares/bonds/mixed, etc.).
Develop a long-term investment strategy. Determine the time horizon of your investments and choose the right funds for it. Remember that the simplest methods are often the best: diversification and regularity. Therefore, do not bet on only one type of investment (the 60/40 rule can be cited here, i.e. dividing the portfolio in 60% into investments in stocks and 40% investments in bonds) and bet on regular payments.
Monitor progress and evaluate results in a timely manner. If you choose a longer time horizon, give yourself time to evaluate your investment. For example, with a fund with a time horizon of at least 5 years, you have to accept the idea that short periods will be worse – even bring losses. Therefore, the analysis of this type of investment should be different than in the case of short-term investments.
Start Small
You don’t need to own large sums to start investing. It is worth starting with small investments that will allow you to gain experience and learn in practice what the volatility of investments is. Even small amounts can bring significant benefits in the long run – it is worth betting on regular payments, which will also allow you to discover the magic of compound interest, which you will probably read and hear about more than once. If you are looking for specific information on how to start investing, you will find the most important information on our website. Remember that investing even small amounts has its benefits:
- You gain experience. By investing smaller amounts, you learn market mechanisms and making the right decisions without risking large sums.
- You minimize the risk. Temporary losses have less impact on your finances, which allows you to build your investment portfolio with peace of mind. At the same time, you increase the chances of taking advantage of the increases and increasing your profits.
- Even small amounts can bring profits. Thanks to the effect of compounding interest thanks to compound interest.
Educate yourself
Before you start investing, it is worth gaining as much knowledge as possible about financial markets and various investment instruments. You can attend training, read books, articles, and blogs about investing. It is important that you understand the principles and risks associated with different types of investments. Remember that investment education is a continuous process, so it is worth continuing to develop your knowledge on this subject. Goldman Sachs TFI meets your needs in the Investor Academy, where you can expand your knowledge. Also take a look at our blog, where we regularly publish market analyses, investment theses, podcasts and comments from our experts. Although at first the amount of information, nomenclature and described events may be overwhelming, after time you will get used to them and it will be easier for you to navigate the world of investment.
Diversify your investments
Diversification is a key principle of investing. It involves dispersing your investments across different assets, industries, or geographic regions. This will help you minimize your risk and increase your profit potential. Whether you’re investing in stocks, bonds, or commodities, it’s important not to put all your eggs in one basket. It is also worth taking an interest in various options for using the investment, e.g. investing in IKE and IKZE, which is an attractive solution for investing in retirement. Diversification will make you more resilient to market fluctuations.
Monitor your investments regularly
Investing is a dynamic process, so it’s important that you monitor your investments regularly – however, this doesn’t mean that you should do it several times a day. On the contrary – checking investments every day can even cause a feeling of panic. Beginner investors are often sensitive to changes in performance – and let’s face it, fluctuations are natural in the world of investment. Check how they develop and whether they meet your expectations, but do it wisely – e.g. once a month or for a few weeks. If you notice any irregularities or inconsistencies with your investment plan, it may be worth taking appropriate action. Remember that investing is a long-term process, so don’t expect quick results and don’t get carried away by panic with temporary drops. Also, be aware that there are periods when the markets have worse or better moments. Sometimes it is better to be patient and wait out the worse moment.
Simulate and test your investment strategies
Before you make specific investment decisions, it’s a good idea to test your strategies using simulation tools. Goldman Sachs TFI offers a regular investing calculator that will allow you to see how different investment scenarios can affect your potential return on investment. These simulations allow you to assess how your investments may behave in different market conditions, which is invaluable for long-term planning and making informed decisions.