Women are usually more threatened by poverty when retiring. We earn less money in general, we live longer and often stay by ourselves at the end of our lives. Luckily, we can eliminate such a situation with investing young and regularly even a small amount of money!
Starting to build an investment portfolio may be one of the most crucial things that can help you reach your goals. It can help you to buy a house, become financially independent when retired or even to be able to stop working earlier or buy a house.
In this article, you will get a 3-steps plan on how to build an investment portfolio based on your needs and goals. Here are a few tips on how to start to build an investment portfolio and let your money work for you!
QUESTIONS TO ANSWER
Before you start building your investment portfolio, you need to have answers to the following questions:
After you have answered these, you have a ground for defining where and how to invest.
TIP: You should also know how much you need to invest to reach your goals! You can find a calculator we created to find out how much money you should invest regularly to get to the number you need to reach in the future.
FINANCIAL RESERVE
Another critical part before starting building your investment portfolio is to have a financial reserve. The financial reserve should cover at least 6 months of your average spending.
Do not skip this part, because investing for a longer run means you should not take the money out once you need (for example) a new fridge. You need to leave the money there for a defined period. In addition to that, you should always invest the money you can survive without.
Investing can be very safe and the risk can be low, but we still need to mention the possibility that you will lose the money you invest.
GET RID OF YOUR DEBT
Before you start investing, you should get rid of your bad debt. Not paying your debt out means you are losing money due to the interest (especially when you have consumer loans with high interest rates). So if you have any debts, focus on them first.
FYI: Bad debts are loans, which just take money out of your pocket and will never bring you anything. For example, loans for holidays, Christmas gifts etc. Loan for your house or for your business is not a bad debt and you can invest while having them.
HOW MUCH CAN YOU PUT ASIDE FOR INVESTING
In order to start investing, you must be able to save some money aside. You can save money according to the old 50/30/20 rule (50% of your money goes toward needs, 30% toward wants, and 20% toward savings) or sending the money you want to invest first when you get the paycheck.
Now after you answered all the questions and you have your financial reserve, you can start looking where to invest. I would suggest starting with the easier options and start adding the more complex products after you get some confidence and experience. Your choice will depend on the questions we already covered at the beginning of our article.
You have for example these choices:
All the products have their pros and cons. If you are starting and have a long investment horizon in front of you, investments to ETFs made from shares can be a great option. An ETF is a great way to diversify since it's a package of different shares, so if one of them fails, you have many others that can make up for this one.
You can educate yourself and start to invest in them by yourself directly at the brokers like DEGIRO, XTB or Trading 212.
Mutual funds and bonds are more of a conservative way of investing but can be a nice addition to your portfolio. When feeling like it, you can start thinking of other options such as REIT or gold. The options of where to invest are quite limitless.
If you want to start with something easy, I would suggest starting with platforms that invest for you. These platforms will, based on a survey (asking about your goals, horizont etc.), create a portfolio for you. This way you can start learning more about investing and all you need to do is send money to the platform on a regular basis. I would mention two platforms, Portu and Fondee.
At Investování pro holky, we prefer long term investing, where you don't have to interfere and change the portfolio at all. Long-term investments almost always outperform the market when investors try and time their holdings.
DIVERSIFICATION
The crucial part of investing is diversification. Diversification is a great way to reduce the risks of investing. You can diversify by investing in multiple different products and platforms.
MONITOR
Track your investments from time to time, you can use a very easy excel sheet or purchase something a bit more advanced. You can find such examples of how we track our investment here.
LEARN
The most important step to build a portfolio that works for you is to learn about the market and your options. You can find sources talking about money everywhere, from books to Youtube.
TIP: If you speak Czech, you can also join our Zero to Hero Academy, where we teach women how to start their investment portfolio step by step. In the ZTH Academy, you will also find a supporting community of women where you can ask any question!
If you have any questions, do not hesitate to contact us at investovaniproholky. You can find a lot of materials on our website such as blog posts, tables for budgeting or an ebook, which will help you to start!
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