The world full of financial uncertainty makes us think about our own financial stability. One of the most effective ways how to reach this goal is regular investment. No matter if you are an investment newcomer or experienced investor, regular investment is the key. In this article, we will have a look at the basic principles of easy saving. We will explain the examples of the real situations, how 50€ can become 12 000€, and no this a not a cheese magic trick.
By creating individual financial reserves, we will focus on investment funds. It is a financial instrument gathering financial means from a number of investors and purchases a bigger number of other financial instruments such as bonds, stocks, commodities, properties and many others. This form of collective investment enables an individual to be a part of bond purchase of the best companies in the world, but with smaller investment sums. The principle of investment triangle is validhere, however we will show you how to get the maximum from them and thus lower the risk of loss:
- Regularity
The regular investment enables the purchase of assets at the different times and for the different prices and thus lowering the risk of money loss, because in the end, we purchase the assets for the average price.
- Diversification
It helps to lower the investment risk and also brings the optimalization of the profit. The common funds invest into a wire scale of assets and thus lowering the affect of the negative events in one particular area or asset.
- The right fund choice
Fund choice must be aligned with YOUR expectations. With long-term horizon, we can invest with a higher potential of risk and higher volatility and thus still investing safely. However, the same portfolio for a short-time horizon makes an investment riskier.
- Time
Time is crucial and creates so-called interest-on-interest. It does not matter how much you invest, just start.
- Fear management
Investment is based on the fact, that the market moves in the particular ways so will be your assets. It is all right. During the decrease, the finances must not be taken out. It is an ideal time to purchase! When shoes are in sale, you buy them, or not?
- Your goals
Do not forget about your goals and review them regularly. What has value now, does not have in the future, in 5 years or so. Therefore, it is important audit your portfolio regularly.
- Taxes
The capital profit should be taxed. However, more optimal option is EFT investment – these are index funds,ehich are tax free, after 1 year of holding.
- The income increase should be projected into your investments
The 3-4% increase every year can make a thousand-euro difference at the end of your investment.
Now it is time for magic 😊 The magic of the best fitted saving.
50€ monthly can make, with mid-term horizon and 5%p.a. interest, in particular years, sum as below. And the long-term horizon with 9% p.a. interest, in the table below.
| 50€ saving per month | Investment sum | Mid-term portfolio Assets and bonds | Long-term portfolio Assets |
| after 5 years | 3000 | 2 849,95 € | 3123,04 € |
| after 10 years | 6000 | 7 071,98 € | after 10 years |
| after 15 years | 9000 | 12 490,33 € | 17 403,87 € |
| after 20 years | 12000 | 19444,06 € | 31 048,41 € |
| after 30 years | 18000 | 39 821,02 € | 85 858,99 € |
The long-term portfolio has been, of course, more affective.Because it is a portfolio, where we can have a higher volatility with a higher profit goal. The mid-term portfolio guarantees a lower risk, however secures the stable profit after a shorter saving period. Our constant reminder to clients is to have the porfolio set up according to their expectations.
What is important to point out is the relationship of time and saving. The highest profit is made of so-called interest-on-interest, which ensures a higher profit after time.
So no miracles. It is enough to follow the basics of regular investment and start generating your future profit.
How much you would like to have on your future account? How to do it? Do not hesitate to contact us!
Your ProFin Experts team! Translated by Barbora Zemko Zuzaniaková
