Isn’t that only for grey old men Ellen? Aren’t you afraid you’re going to loose it all? Don’t you need like 20.000 euro’s to start off with?! Oh, so is it similar to banking on bitcoin?
Once I tell people in my surroundings I invest a bit of money on the market I tend to get a lot of mixed responses. At first, I was therefore very shy to talk about this. But now I’ve come to a point where I honestly don’t care what people assume, and I rather want to break some misconceptions that are out there.
Investing your money isn’t scary, once you understand the principles it can be rather fun. Although, a classic investor would say the stockmarket should be the most boring hobby there is out there, seeing as you don’t touch the money and just let it grow.
When you invest money into a certain company or fund it basically means you believe enough in the company or the fund to grow, that you allow to ‘borrow’ your money to this company, so that it can either increase sales, or increase their hires, or increase their R&D projects to grow their business more in the future. In return for your borrowed money, the company can then give you a ‘profit’, once they do their yearly reporting. As the times go by and companies take a certain strategic approach, the trust in these companies can either go up or down, which means people either want to have their money back [sell] or want (more) shares in this particular company [buy]; resulting in stock price increases or decreases. So the key is to find companies that excite you enough, or a certain industry that you think can do well in the future, so that you can place your money into a certain fund or company.
To put this into a clearer example, I can share my brief history of investing. Bare in mind, I’ve been only doing this for 1 year, and in the investment world that means I am a total NOOB, a kid that just came looking around the corner, and therefore, please do not take MY viewpoints as any truth. Rather a clear example of someone’s journey on the stockmarket. The graph shows how my portfolio’s have been doing compared to the Swedish stockmarket. As you can see the past 12 months, that market has been rather negative and currently flat at 0% growth. My portfolio is currently at 10%, and as you can see, is a lot more volatile at the moment. 10% return on investment is quite high. The Swedish index has been doing 7% on average the past 50 years. And here’s exactly where you need to pay attention. I’ve only been doing this 1 year, and my portfolio can also drop tomorrow. 7% return over 50 years is a VERY good return on investment. The Swedish Index has historically outperformed the housing market, steady bank interest rates and hedge funds. The first thing to keep in mind with investing in the market is: time. You’re in it for the long-haul. There will be ups, there will be downs, but in the end, if you wait it out, the stockmarket has always given back.
Then, back to starting up an account. The first tip I could give you is to see what the online broker options in your country are. For the Nordics there is Nordnet and Avanza as favourites (, and recently I opened a Lysa account to test robo-saving, more on that later). Otherwise there is DeGiro, which operates in multiple European countries, and is the cheapest one out there that I’ve found if I want to trade French or Dutch stocks. German stocks are unfortunately very expensive to trade if you have a non-german account.
You could also choose to save in funds at traditional banks, but please bare in mind: a bank will ALWAYS sell you their own funds FIRST. Bank salesmen get commissions on selling these and the fee’s for having these funds are usually VERY HIGH compared to independently run brokers. Any fund that has more than 1% in fee is too expensive. Rather than you racking up some extra money, you’ll be handing over hard earned price increases to your corporate bank.
The business model of an (online) stock broker is to charge a fee for every transaction you make. Say you buy 10 Volvo shares at €20, an online broker could charge 0,5% of the transaction. Make sure to choose an online broker that operates in the country you pay tax (ergo: I’m Dutch, but pay taxes in Sweden and thus use Swedish banks to avoid any tough tax declaration issues)
The second step is to then think about which type of company or industry excites you. I, for instance, work in tech, and will therefore be drawn to tech-companies, like Amazon, ABB, Alphabet, Microsoft, Tobii. I also invest a bit in green energy companies and medical companies, as I believe both to be necessities in the future. I plan to write more about sustainable investments in the future, but here is an overview of my current holdings.
The third step is to then choose and place an order: my very first order I ever did was to invest €10 in a SPP fund. It was so scary and exhilarating, €10 euro’s I’ll never forget (+that are now worth €11,72). Then you HOLD, or for the cryptocurrency fans around here: HODL [Hold on for dear life]
Then to debunk some of the first questions in this blog:
- Yes, the stockmarket is currently for grey old men, and it is time to change that! Young (female) people need to take a more active approach in their economic situation and increasing your savings is one way of getting there.
- When investing money there is always risk. So if you were to invest all your money into 1 company or asset (like f.e. cryptocurrencies), then yes you CAN LOOSE it all. The key is to spread your risk and invest in multiple different industries and companies, case in point are my portfolio holding above. That way if one goes down, another one might go up. If I were to loose all my money, it would mean economies in Asia, Europe, Latam and the US would all have crashed. Multiple global companies would have gone bankrupt. And if thát doomsday scenario were to be true, I would have far bigger issues in surviving and being able to even have foodsupply in the supermarket, than a stockportfolio that went awry.
- You do not need a large capital sum to start investing. Some stocks trade for as little as 5 cents, others for €5 euro’s, some for €50. Most fund purchases require a minimum of a €10 euro input. Many online brokers also allow you, as a starter, to trade without a fee, on your first €5.000 (avanza) or €8.000 (nordnet) and even €100.000 (DeGiro – for Swedish account, check your local market). This means that for many, their first months or years of trading can be done without paying transaction fee’s.
- Investing in the stockmarket is NOT like banking on bitcoin. Cryptocurrencies are lately much discussed and seen as a quick way to make money. They are extremely volatile, it’s a short term bet and you need to keep your head very cool. Investing on the stock market is rather, for many, a long-term plan with a timeline of 15+ years. Building companies takes time. Organic growth takes time.
Ready to start saving? Last time I got a few people writing to me with questions (which I think is a lot of fun! so please reach out if you want to know more), I hope this overview gave a good insight into the different accounts that are there.