Saving or investing money is something that all people should do. Most people probably also have some type of savings, since if the money is invested in eg shares or funds or if they are put away in a savings account can vary. The most important thing is that there is some form of active saving, but certainly it is good that you optimize how you save your money and if you invest, that you do it in a good way. Therefore, we should look more closely at good and less good things to do when it comes to investing.
Saving money (putting away money) each month is very good
It is important to get money over each month and to spend money on something you want to buy or just as a buffer if something goes bad. Investing some of that money is also very good as it is very nice to get a return on your money. Who doesn’t want to make money passively?
Investing money in equities and funds (but also currencies or whatever you believe in) is a good way to build up capital. In most cases, you can get more returns here than if you have the money in a savings account, for example. The risk of the savings account is obviously less but the chance of good profit is also clearly less.
Of course, it is important to be wise when investing and to optimize your savings so that you get the most out of your saved money. I therefore thought here to go through a number of good tips on things to do and things to avoid when it comes to investing and saving. Maybe it can help you make better choices.
What to do when investing
Acquiring an ISK – An Investment Savings Account or ISK is the right way to go if you plan to save in cheap funds and the like in the long term. The account has no ordinary tax on sales and profits but has a standard tax that is paid annually. This tax is currently advantageous and as long as you have a return that exceeds the tax, it is a good way to save money. In addition, you can freely exchange funds without having to report profits etc. in the declaration.
Choose Cheap Index Funds – If you want to save in mutual funds, it is sometimes difficult to know which funds to invest in. However, it is quite clear that most people should invest in cheap index funds. Especially those who are not so familiar and who want to save with a long savings horizon. You may pay 0.2 – 0.4 percent in fees for these compared to up to 1.5 or more for actively managed funds. Moreover, the actively managed funds often do not even fare better. Choose broader funds such as Global Fund, European Fund, Swedish Fund etc. for the portfolio.
Learn shares before you start trading – It’s easy to think that you can just become a stock professional a little quick and easy. There are so many experts who tip here and there and many probably think that if they just follow their tips and recommendations then it will be fine. However, you should like to learn what makes certain stocks go well and why, plus how the market works, so that you can actually choose companies based on what you think is good. Learn fundamental analysis and the like and find your own companies instead of relying on others. The risk is that you are second on the ball and jump on the train when the share has already gone up.
Only invest money that you can afford to lose – This is a classic tip that is important. You should invest money that you have in addition to what you need to live. There is always a risk that investments will lose value and you do not want to risk the money you need to clear bills and other things in this way. An important reason for this is that if you need to spend the money you have to sell even if the investment has lost value. What you should do instead is wait until the market has recovered, which you can only do if you have no pressure to spend the money earlier.
Do an annual review or more – No matter how little you really care about your funds and if you are not so invested, it is after all important to do a review at least once a year. More often than not. Then you have the opportunity to evaluate your portfolio and make changes. Also to distribute the risk a little better, so that you are at the risk level you want. If you wait too long to check through investments, it can be so bad that you take unnecessary losses or miss profits that you should have been able to get.
Choose a good bank as needed – When deciding where you want to invest your savings, consider what need you have. If you are interested in mutual funds and stock trading, it is likely that an online bank such as Avanza or Nordnet has the best opportunities for you. The usual major banks do not have as good a range of funds, for example, and would like you to have their expensive actively managed funds. When you want to save on a savings account – look for a savings account that has a little reasonable interest rate instead of content with what you get from your regular bank.
What not to do when investing
Investing in uncertain forms of investment – Forex (currency trading) and BitCoin etc can sound attractive and those who offer this type of trading often tell you how much money you can make and so on. It’s easy to think it’s a gold mine. Especially with BitCoin and its spectacular development. However, it’s never good to invest in something just because it’s a hype or because it sounds good. If you do not understand the type of investment and feel safe with one, there is a risk that you will make bad choices and lose money. Benefit from simpler things like stocks and funds.
Trading with leverage – For example, currency trading offers something called leverage where you can in principle invest more money than you have in the account. With 5 times leverage, you can bet SEK 5,000 even though you only have SEK 1,000. If you make a profit this is of course good as you have received five times more profit than you would otherwise have been able to make, but if you make a loss you can clearly lose more than you have in the account. It is a great risk to take and nothing I recommend except for those who really know what they are doing and know that they can afford to cover any losses.
Trust your bank advisor blindly – The bank’s advisor is there to help you make the decisions that best benefit your finances. Or? It should not be forgotten that the advisors work for the bank and they want to make as much money as possible. They put the bank’s best ahead of your best. Sometimes it may not hurt you when the bank and your interests coincide, but many times, for example, they will suggest funds on which they make more money rather than the funds that would be best for you. If the advisor suggests something, you can take it with a pinch of salt and then check out on your own what options you have. There are often better opportunities elsewhere and do not hesitate to take advantage of this.
Trade shares that someone else has become rich – A classic is that a friend or colleague etc tips on a share on which that person has made a lot of money. The person in question tells how good the stock has gone and what a nice share it is (since they have earned a lot on this share). You then get the urge to buy the same stock. The problem with this thinking is that you are too late out. If your friend or colleague has already become rich on the share, it has already gone up much earlier. Maybe it has reached its maximum limit. Perhaps it has exceeded its valuation. There is a possibility that it is a gold grain that may go up more, but be careful and keep in mind that shares that have gone up much earlier need not go well at all in the future.
Invest / save some money if there is something left at the end of the month – Something that quite a few probably do is that they pay bills etc and then they pay for food, entertainment and other expenses during the month. Then they check at the end of the month if there is any money left and that money can then be put away for savings and investments. However, it is much better to budget for a certain saving, which feels reasonable, and put that money away directly. As if they were a fixed expense that cannot be changed. This way you usually save a lot more money and get a good stable savings. So put the money away immediately when the salary has come, preferably via direct debit / automatic transfer, and buy funds or something.
Believe it is too difficult to invest money – Unfortunately, many people are hesitant to invest money in equities or funds when it seems complicated. Then they leave. They may put money into a classic savings account with poor returns or possibly follow the advice of the bank’s adviser. This usually results in poor returns, high fees and, in general, very little of their savings. Maybe you don’t even save any money.
It is not that difficult to learn the basics and make some good investments. Especially when it comes to cheap equity funds. There you can not make many mistakes. Buy cheap index funds and save in the long run. Preferably a global fund, which has breadth and lower risk. It also does not take too many hours of students and reading to gain a basic understanding.