Investing for beginners: five things you need to know

For all beginners, it’s reassuring to know what you’re getting into.

That’s no different for someone starting out in investing. It’s helpful to have a few things lined up so you can get started with confidence. You don’t need to become an expert in investing before you begin. In this blog, you’ll find five important things to know as you take your first steps in investing. Read through them, and who knows—you might take the leap and start building something for your future.

1. Reduce your risk: diversify your investments

When you invest, there’s always some level of risk involved, so it’s wise to only invest money you can spare. With Peaks, your money is automatically invested in six different (and sustainable) index funds around the world, spreading your chances and risks. Diversification means not putting all your eggs in one basket but investing in a variety of stocks and bonds across regions and industries. This way, you minimize the risk of losing your money as much as possible.

2. Invest with money you can afford to lose

As mentioned before, it’s smart to only invest money you can spare—money you won’t need anytime soon. Investing involves risks, and the value of your investments will always fluctuate. To avoid having to sell your investments at a loss, it’s better to invest only what you can afford to leave untouched for a longer period. This gives you the time to wait out any dips in the market.

If you'd like to figure out how much you can (and want to) spare, it’s important to understand your income and expenses. Maybe you already have this down to a science and know exactly how much you can set aside each month. If not, take an hour to get it sorted. Write down your income and expenses from the past few months in a digital budget planner. Most of the groundwork is already done for you—you just need to go through your bank statements to see where your money is going. If you’ve built up a financial buffer and have a little extra each month, you can start investing, even with small amounts. Over time, even small contributions can grow into a significant sum.

3. Even small investments pay off

You might think investing small amounts doesn’t make much of a difference, but it does. One of the key factors in successful investing is time. The more time you have, the longer your money can work for you. You don’t need to be wealthy or inherit a fortune to start investing. Even with modest amounts, you can see returns on your investments. With Peaks, you can start investing with as little as €1 and decide how much you want to set aside daily or monthly. For instance, investing €30 per month can yield substantial returns over the long term. 

4. Returns: let your money work for you

What does it mean to let your money work for you? Whether your goal is buying a home, saving for retirement, purchasing a new car, or going on a world trip, the key to investing is this: the earlier you start, the more time you have to let your money grow. Waiting too long to start investing can mean missing out on significant potential returns. That’s because, as you get older, you have less time to benefit from the compounding effect. The return-on-return effect allows your returns to generate more returns, leading to exponential growth of your invested money over the long term.

5. Take your time and be patient

History shows that stock markets have always risen in the long term, though not in a straight line. There will be times when markets dip. For new investors, this can be alarming. However, it’s not wise to withdraw your money during temporary downturns, as this guarantees a loss. Successful investors thrive because they focus on the long term and stick to their plan. They aren’t thrown off by market dips, nor do they immediately cash out during market highs. This allows them to maximize the benefits of the compounding effect. Perseverance is a crucial trait for becoming a successful investor.

Invest easily with Peaks

Some investment platforms make investing complicated, but not Peaks. The Peaks app is designed to be user-friendly, even for beginners. Download the app, link your bank account, and start investing—it’s that simple. Whether you start with €10 or €500, the most important thing is to get started. The earlier you begin, the better.

Keep in mind that investing involves risks, and you may lose (part of) your initial investment.