by SMO Team
We would like to show a few approaches that can serve as something to consider or inspiration. As a basis for our thoughts, we assume that all investments have a long-term horizon and are diversified under the usual risk parameters and are made in high quality investment objects.
Even so, money management is a very individual matter because everyone has different financial goals.
We often hear the question: should you invest once or invest regularly?
Both approaches are target-oriented if it is a long-term investment.
The combination of both methods is the most effective. You can get a good example in our article "Build Wealth with Investing - A good way to build wealth".
For most investors who have a normal job and earn a monthly income, regular investing is a particularly good way to build wealth over the long term. The regular investment benefits from the cost average effect.
If you have an amount of cash that you do not want to invest once for risk reasons, this amount can be invested in 2 - 4 tranches over a predefined period of time. Those who do not invest their capital over a long period of time are exposed to the risk of inflation and may miss out on positive price developments.
One of the most important aspects of investing is developing a strategy or plan.
Money management also includes psychological aspects. There are many factors that can play a role. Let's take a closer look at three aspects.
1. What is a realistic profit? And how can I build up assets with it?
a. This point is important for confidence in the long-term investment.
Please have a look at the average return article. There we show that the global stock indices achieve an average performance of about 6-8%.
2. What is my rate of return? How long does it take to double my capital?
a. You can get examples in our article «Build Wealth with Investing».
b. Please look at the amount of the 72 rule.
3. Are price declines a buying opportunity or will prices continue to fall?
a. Regular analysis makes it easier to answer this question. Check out our research.
b. Investing is always long-term! Buy quality at a low price.
c. Good investors are happy about (samll) price declines.
d. Long-term investments in high quality always benefit from price fluctuations (volatility).
f. Don't get carried away by the emotionalism of the press. Form your own opinion.
You can calculate the potential of your investment with our free investment calculator.
Money management is an important part of risk management. Don't put everything on one card. Do diversification.
Make a plan.
Think about the purpose of the investment. For example, if you need the capital to buy a new car in two years, you might not want to invest. If the investment is intended to finance your retirement, you should dimension the risk of your portfolio in a way that is appropriate for your future situation. For example, if you're only 20 years old, you can take on a little more risk in the portfolio than if you're already 65 years old and rely on ongoing dividend payments.