How to start investing: 7 steps

For many people, including myself, investing seems like a far-fetched idea. You've heard about it, you understand what it entails, but actually taking that step to start? No, it doesn't get that far. On social media, you read posts like this that say you can never start early enough. This convinced me to just go for it.

How did I, a layman in the financial world, take that step to start investing? I'll explain it to you in this blog.

1. Think about why you want to start

Before you start, it's important to be clear about why you want to invest. What are your financial goals? Do you want to save for your retirement, buy a house, or just let your money grow? Investing is a long-term strategy, but that could be 5, 20 or even 40 years.

It is also important: never invest money that you will need again within 3-5 years.

2. Build up sufficient savings first

Financial planners advise not to invest until you have a savings pot of about 3 times your monthly expenses. This ensures that you are not forced to sell your investments in the event of an unexpected expense. In addition, you must ensure that you have saved or are saving for large expenses that you want to make in the next 3-5 years.

3. Learn the basics

Take the time to learn the basics of investing. Understand the different types of investments such as stocks, bonds, mutual funds and ETFs (Exchange Traded Funds). Also understand terms such as return, risk, and diversification.

4. Choose an investment account

You need an investment account to start investing. If you live and work in the Netherlands, you can, for example, opt for an investment account with a broker such as DEGIRO or BUX, or with your own bank. You can also always opt for a managed investment account, where for example Meesman or Brand New Day manage all your investments for you.

5. Start small

You don’t have to invest large amounts right away. Start with small amounts that you can afford to lose and gradually build up. This gives you the opportunity to learn and gain experience without taking too much risk.

6. Diversify

Diversification is a crucial principle in investing. It means spreading your money across different types of investments to reduce your risk. By investing in a mix of stocks, bonds and other investments, you can better protect yourself against large losses.

7. Keep it up, but be patient

Keep track of your investment portfolio to ensure that it is still in line with your goals and risk tolerance. But realize that investing is a long-term strategy. It can be tempting to react to short-term market fluctuations, but successful investing requires patience and discipline. Stay focused on your long-term goals and avoid making impulsive decisions based on market volatility.