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16 July 2024 09h50
Source: Banco Carregosa

5 myths about investing your savings

5 myths about investing your savings

 

 

Deciding how to invest is always an important decision. Take a look at these 5 myths and make an informed decision. 


Investing years of savings is always a difficult decision. According to some studies, it can be as difficult as buying a home or making a career change.  Here are 5 myths about investing your savings to help you make more informed and safer decisions.

 

 

Myth 1: Investing isn’t for everyone

 

Many people believe that you need a lot of money or experience to start investing, but this isn't true. Anyone can start investing, provided they research the market and use the tools available.

 

First, it's important to analyse your risk tolerance, investment capacity and long-term goals. Ask yourself: how long are you prepared to hold the investment? What are the most optimistic, moderate and pessimistic scenarios for the investment? What other investment options are available to you?

 

What's more, expert advice can make the difference between success and failure. Professionals in the sector, such as financial advisors, can provide valuable insights and help you make more informed decisions. Being well informed about the risks and rewards of each investment is key to investing.

 

There are also a number of educational tools and resources available for investors of all levels. Attending workshops, reading investment books and keeping up with market trends are all effective ways to increase your knowledge and confidence.Investing is accessible to everyone with careful research, expert help and the right resources. The important thing is to get started and to invest in an informed and strategic way.

 


Myth 2: Investing your savings is too risky


Investing obviously involves more risk than keeping your money in a fixed-term account, but you can manage the level of risk you’re prepared to take. Investing safely means choosing products/services carefully and creating an investment profile with a mix of stocks and bonds that suits your profile. 


For example, for a more defensive approach, you could invest 25% in equities and 75% in bonds. If you’re looking for a balance between the risk and return of an investment, you could opt for a 50/50 split. On the other hand, if your profile is more aggressive and you’re prepared to accept large fluctuations in the value of your assets, you could create an investment portfolio with 70% or more in equities. 


In addition to diversifying the composition of the portfolio, there are other ways to reduce risk. These include:


• Adapt your investment to your life situation, objectives and investment horizon (time you have to invest); 

 

• Analyse the track record before you invest. Research the track record of the asset you’re considering investing in. You can also rely on the recommendations of our specialist analysts when deciding where to invest your money;

  

• Diversify your investments across sectors. By choosing different, low-correlated sectors, you spread your risk because even if one goes against you, another may offset it. You can do this directly through assets in specific sectors or through investment funds and ETFs.   

 


Myth 3: I’m too young or too old to invest


There is no right or wrong age to invest. However, your investment strategy should take into account the stage of life you are in and your financial needs, objectives and investment profile.


Investing when you're young allows you to develop long-term investment strategies as you have more time to accumulate funds and ride out market fluctuations. You also have more time to build long-term capital by reinvesting interest and dividends.

  

As you get older, it may make sense to take a more cautious approach, with goals in mind such as preserving wealth, generating a regular income or transferring more wealth to the next generation. 

 


Myth 4: Investing is only for long-term goals 

 

Investing only for long-term goals is a myth. Although it is a recommendation, if we look at shorter time frames, the possibility of portfolio appreciation can be viable. Take the MSCI All Countries World global equity index.

 

 

 

There are different periods of appreciation and if you look at the last five years, there has been an appreciation of about 58%. Despite these examples, it’s always wise to take a long-term view – which doesn’t mean you can’t achieve good results in the near future. 

 


Myth 5: If I invest, I will lose access to my money and won’t be able to use it when I need it

 

Many investors think that when they make an investment, their capital is "tied up” and they can’t use it if they need to. This is not true. While there are investments that do not allow for the mobilisation or early redemption of capital, this is not the case with all investments. That is why it is important to have a good understanding of the product you’re investing in and to read the terms and conditions of the contract, as the conditions for movement are one of the features mentioned. You may be able to sell your position at any time or there may be specific liquidity windows, such as weekly or fortnightly, depending on the type of instrument.

 

However, even if you are able to sell/redeem the instrument before maturity, you should be aware that in some cases, depending on market conditions, an early exit from your investment may result in a loss of capital.

 


Banco Carregosa, supporting all your financial decisions


These are some of the main myths about investing your savings. To find out the best investment approach for your goals contact us and get the support you need to invest in growing your wealth.