This article is part of a carnival of articles organized by Marc from the blog MieuxGererSonArgent.com, whom I thank in passing for his solicitation. We are a dozen bloggers to contribute to the event, which will allow each of our respective readers to discover other opinions and other points of view around the following question: “What would you advise a beginner who wants to start investing your money? Extensive program! The articles of the various speakers are (and will be) included on the link above, so do not hesitate to take a look at them regularly.
From a personal point of view, the sensation is strange and the experience has a little nostalgic side: I see myself a few years back sitting on my high school chair with a subject, 2 or 3 hours in front of me and a double copy to render. The anguish of the blank page… On your marks, get set… Go!
The first step in any self-respecting dissertation is the introduction.
The question asked is very general and can lead to a number of answers: investment in the stock market or in real estate, savings, etc. All on multiple axes and orientations: focus your return on a single theme? Mention the different possible approaches? Fly over real estate investing? Concentrating on a niche, such as the purchase of parking lots, for example? There are probably as many opinions and as many approaches as there are people . And even more, there is not only one truth and only one right answer to this question, fortunately.
Investing your money is not a trivial thing and as with many things, finding the right investment for your savings is above all a question of context. And since each context is unique and personal, the subject could end there 🙂 . But as our friend Cyrano was able to say, you could then retort to me:
And you would be right! So I’m going to continue the exercise for a few lines, by presenting to you 2 rules that I consider fundamental when it comes to investing your money.
This is the first advice I will give to a beginner to invest his money: before investing in the stock market, in real estate or elsewhere, it is imperative to set up a precautionary savings . It’s the first thing to do. But above all, let’s define together what precautionary savings is.
It is ultimately very simple. As its name suggests, it is a savings that will allow you to face an unforeseen event likely to have consequences on your finances. For example, it may be a car breakdown with consequent repairs, or even the necessary purchase of a new vehicle (just think of public transport). Or a boiler that fails you at the start of winter, just before the temperature drops. The money set aside will allow you to deal with this kind of hardship without affecting your daily lifestyle, and without putting yourself in financial trouble.
This savings is necessary to move on to a second stage, investment. Why is that? Because it would be a shame to turn your investment into failure due to a bad surprise, as in the example mentioned in the article on how long to borrow for a rental investment, when next to that you had a concrete file. In a way, this precautionary savings is a safeguard to be able to manage the vagaries of life without impacting your daily life and your investment projects. Not having one is a bit like performing a few aerial stunts without a net. It’s added risk on an investment that doesn’t need it.
This savings must be easily accessible , so it is often savings placed on a regulated booklet such as the famous booklet A. The amount we wish to devote to it depends on the profile of each: our risk aversion , our monthly expenses, … From my window, the equivalent of 3 months’ salary seems relevant. Everyone is free to see what they think is necessary.
Again, the article could end here. If you had to remember only one thing, it’s this: the first thing to do to start investing your money is to build up precautionary savings. But I still have a second piece of advice…
Once precautionary savings are in place, it is still not the time to invest. Do not put the cart before the horse. Learning before knowing how to invest your money well is a necessity. Whatever your investment wishes, several levers are available to quench your thirst for knowledge:
Of course, you can start your apprenticeship during the period of building up your precautionary savings. If learning is a necessity before getting started, in investing or elsewhere, the effort must be maintained over time: the world changes, the rules evolve, the laws adjust. Cultivate yourself again and again , learn and don’t take anything for granted. Take the time necessary for all this: it will always be more relevant to lose several months to learn about a subject rather than to lose several thousand euros for having forgotten to learn something. Keep that in mind.
To conclude, never lose sight of these 2 rules: it can be dangerous to embark on an investment project without precautionary savings and without knowledge of the area in which you wish to invest. Does a tightrope walker perform their number 10 meters high without a net? No, his net is the equivalent of your precautionary savings. Does this same tightrope walker oscillate several meters above the ground on its first day, on its first attempt? No, he trained long hours to achieve this result, and he still trains every day to keep the technique and form necessary for such an exercise. One last piece of advice by way of conclusion: get started ! What’s the point of having followed these 2 tips if it’s to do nothing afterwards? 🙂
And you, what advice would you give to start investing your money? Have you already built up your precautionary savings to start investing?