Where should a beginning investor invest money?
Private investment is experiencing a real boom all over the world.
Last year and the beginning of this year were marked by a rapid growth in the number of private investors.
This trend has not bypassed Russia either – 8.8 million new investors in 2020 and more than 15 million in January 2021 alone, according to the Moscow Exchange.
But the desire to invest is not enough. To achieve real returns and minimize risks, you need to invest wisely.
Experts from the Vyberu.ru have compiled advice for novice investors.
Mutual investment fund
Mutual funds are formed from shares purchased by shareholders. The entire process is organized by a management company. You can start investing with a relatively small amount—around 1,000–3,000 rubles—and all activities are transparent and overseen by the state.
Disadvantages for the shareholder:
- the risk is higher than when placing money in deposits or buying bonds;
- You have to pay commissions even if you don't make a profit.
Depending on the type of mutual fund, there may be restrictions on the sale or exchange of shares. To choose a good fund, you need to have at least a basic understanding of this area.
Bank deposit
One of the best options for beginning investors, deposit programs are simple, transparent, and easy to understand. To earn money on deposits, you need to:
- have an impressive starting sum;
- Choose long-term deposits, and for those programs that do not provide for partial withdrawal or replenishment, the interest rate is usually higher.
The downside of this method is the low, albeit stable, return. The average interest rate on ruble bank deposits is around 5%, while for dollar and euro deposits it's 1% or less.
Bonds and shares
In terms of profit, stocks offer the most potential, but they also carry significantly higher risks. They allow investors to earn passive income in the form of dividends. There's virtually no ceiling on returns. However, trading on the stock exchange requires considerable experience. Furthermore, your money is practically uninsured, so you can lose everything and end up in the red.
Bonds are more stable, less risky, but also less profitable. For example, OFZs (federal loan bonds issued by the Russian Ministry of Finance) provide a guaranteed, but relatively low, return to investors. They are one of the safest, highly liquid investments.
Foreign exchange market
Foreign currency is a tool that allows you not only to save money but also to generate profit. There are several ways to invest it:
- Buying and selling cash. This isn't the most profitable method, but it's also risky—carrying large amounts of cash is dangerous. Furthermore, foreign currency, like the Russian ruble, is subject to inflation.
- Eurobonds. The yield here is higher than, for example, on bank deposits. They are issued by large companies or the state, so they are highly reliable. The main risk is interest rate fluctuations. You will have to pay a 13% tax on profits.
Currency can be traded on the exchange, although this isn't investing in the traditional sense. Moreover, buying and selling isn't necessary—you can profit from rising or falling rates when making trades. Individuals, including beginners, can also participate in trading.
Individual investment account
An IIS is an individual investment account that can be opened with a broker. The broker provides the client with access to the stock exchange, which can then be used to invest. Today, processes are almost completely automated—most transactions can be completed from home online (on a PC or smartphone).
You can't withdraw funds from an individual investment account for three years after opening, but you can add funds to it. The minimum amount is 400,000 rubles, and a tax deduction is also provided.
With an individual investment account (IIA), you can buy stocks, bonds, or funds. After gaining some experience, you can try options, futures, and other more complex investment instruments.
The main drawback of this method of investing is that you need to understand the process, rather than just mindlessly buying and selling. But today, brokers have simplified the process for investors by releasing specialized apps and programs.
Finally, a few tips for the beginning investor: invest only your own savings, not borrowed ones, divide your available funds into several assets, at least understand the market at a minimum, and don't make hasty decisions.
