Some tips to save money
Before you have a conversation with a bank or financial advisor, you should clarify for yourself
– your investment objectives
– Your readiness to assume risks
– the desired commitment period
– your return expectations
It is important that you define the purpose of the investment as precisely as possible. A few examples: Are you planning your private pension plan? Do you want to invest savings for a rainy day that is available daily? Would you like to renovate your apartment or buy a house in a few years? Do you want your children to be financial secure until they come of age? Etc.
Rate of returen
This is the return per year in relation to the capital invested (expressed as a percentage. An example: You invest 1000 euros. The income generated by this investment is 30 euros (after deduction of capital gains tax). The return on your investment is therefore 30 Euros : 1000 Euros = 3 percent. The yield after deduction of taxes and expenses is interesting for you. If, for example, you have to pay 5 Euros for account management at the end of the year, your net yield will drop to 25 Euros. In this case your net yield is only 2.5 percent.
Depending on the type of investment, there are a number of risks involved: corporate, market, interest rate, currency, exchange rate and value fluctuation risks.
There is no such thing as “zero risk”. In principle, the higher the (expected) return, the higher the risk. You should be aware of your own risk tolerance – and to what extent you can financially cope with losses or a total loss of the capital invested
Return and risks
The greater the risk, the higher the return is usually. There is no such thing as a completely risk-free investment product.
Commitment period for the investment of funds
The longer you tie up money, the more return a savings and investment form usually generates. But be careful: If you want to withdraw your money prematurely, this is often associated with losses or even contractual penalties.
Tips for signing an investment contract
The central basic rule when concluding contracts is: If you do not understand an investment product, then you should leave it. Example: If you are unsure how a savings plan for a limited partnership interest in a real estate development project works – hands off!
Another basic rule is that you should know about the three central factors of investment:
- what is the return?
- how risky is the investment product?
- how long is the commitment period and how is the termination regulated? Go through the contract with your advisor, including the small print, in detail!