It is the big question that all savers ask themselves. Saving money from savings in a conventional checking account gives us the same profitability as if we kept the money under a mattress: 0%. In addition, in a context like the current one, with very low interest rates, bank deposits are also not an interesting option to invest.
To benefit from the enormous power of compound interest, capable of getting our savings to multiply in the long term, we have to put our money to work for us. To achieve this it is essential that we look for an investment product that offers us a decent return of at least 5%.
The question is, when did it pass from saving to investment?
Here are the three steps you should follow:
Create an emergency fund
Before thinking about investing our savings, we must create an emergency fund, that is, a piggy bank that we can have at any time to face any unforeseen or unfunded budget that may arise.
The size of this emergency fund should be the equivalent, at least, six months of your monthly expenses. For example, if you spend 1,100 euros on average every month, the recommended emergency fund would be at least 6,600 euros. You should have this money in a second checking account or in a savings account that you can use at any time.
Acquire knowledge about investment
Just as none of us would think of flying a helicopter without having previously learned to do so, we should not start investing without having a good financial knowledge base. It is not about learning everything about investment, but about acquiring a minimum financial base.
The first thing to learn is that inflation reduces your purchasing power, so you must be able to obtain a return on your investments that exceeds the Consumer Price Index (CPI). Thus, if the annual CPI is 2%, your investments should offer a return higher than 2% if you do not want to lose purchasing power.
The second fundamental concept to study is the compound interest, defined by Einstein as the most powerful force in the universe for being able to get our savings to multiply automatically over time without us having to do anything.
From here, everything you learn about the world of investment will be of great help. For example: what is the stock market and how money is earned in it, differences between fixed income and equity, what is an investment fund, the risks of investing . The greater your knowledge, the easier it will be for you Manage your investments
Seek professional help
The investment is not for amateurs. If you have followed the previous advice and have managed to acquire a good financial knowledge base, you should now seek the help of an investment professional, that is, of a financial advisor. Only a person who is professionally dedicated to investment can get your savings to provide you with a decent and stable long-term return.
In matters of financial advice, it is best to run away from the advice our bank can give us, since it is fully tied to the financial products in which it is a part. Therefore, our bank will not offer us the best investment products, but those that are most interested in marketing. It is better to opt for a good independent financial advisor, although it will not be easy to find. Of course, we recommend that before hiring you ask these five questions to know if you can trust him.