With your budget under control, an emergency fund established, and debts managed or eliminated, it’s time to think about the next step in your financial literacy journey: investing.
Investing is a powerful way to build long-term wealth, allowing your money to work for you.
In this edition, we will demystify the process of getting started with investing. Whatever your level of knowledge or the amount of money you have available, there are accessible and safe investment options that can help you grow financially.
What Is Investing?
Investing means putting your money into assets that have the potential to grow over time. Instead of simply storing your money in a bank account with low interest, investments allow you to earn higher returns, although they do come with some level of risk.
There are different types of investments, each with its own characteristics, advantages, and risks. The most common choices include stocks, investment funds, bonds, real estate, and more recently, cryptocurrencies.
Why Should I Invest?
Saving money is important to cover emergencies and achieve short-term goals, but in the long run, idle money loses value due to inflation. To truly grow your wealth and increase your purchasing power, investing is essential.
Here are some reasons why you should consider starting to invest:
- Wealth Growth
- Long-Term Goals
- Combating Inflation
- Passive Income
GETTING STARTED WITH INVESTING
1. Set Financial Goals
Before you start investing, it’s important to define your goals. Ask yourself: what do I want to achieve with my investments? Knowing your goal will help you choose the right investments for your profile.
2. Know Your Investor Profile
Your investor profile refers to your risk tolerance — how much risk you are willing to take with your investments. Conservative investors prefer safer options like bonds, while aggressive investors are willing to take more risks in exchange for higher potential returns, such as stocks or cryptocurrencies.
There are three main profiles:
- Conservative: Prefers safety and liquidity, accepting lower returns.
- Moderate: Willing to take some risk for reasonable returns.
- Aggressive: Willing to take higher risks for potentially higher returns.
3. Diversification
One of the golden rules of investing is diversification — don’t put all your eggs in one basket.
Diversifying means investing in different types of assets to minimize risk. For example, by investing in stocks from different sectors and in bonds, you spread your risk and are better protected from potential losses.
4. Start Small
You don’t need a lot of money to start investing. Nowadays, it’s possible to begin with small amounts, especially through online platforms that allow you to buy fractional shares or invest in funds with low minimums.
TYPES OF INVESTMENTS
1. Stocks
When you buy a stock, you’re acquiring a small part of a company.
- Advantages: High growth potential; possibility of receiving dividends.
- Risks: Volatility; risk of partial or total loss of invested capital.
2. Investment Funds
Investment funds pool money from multiple investors to invest in stocks, bonds, or other assets.
- Advantages: Diversification; professional management.
- Risks: Depends on the type of fund, but stock funds carry higher risk than bond funds.
3. Bonds
Bonds are loans you provide to companies or governments, and in return, you receive interest payments.
- Advantages: Stability; regular interest payments.
- Risks: Default risk (the company or government may fail to pay); limited return.
4. Real Estate
Investing in real estate can be an excellent way to generate income through rent or property appreciation over time.
- Advantages: Passive income through rent; long-term appreciation.
- Risks: Maintenance costs; real estate market price fluctuations.
5. Cryptocurrencies
Cryptocurrencies like Bitcoin and Ethereum have attracted a lot of attention in recent years.
- Advantages: Potential for very high returns.
- Risks: Extreme volatility; lack of regulation; risk of total loss.
TOOLS AND PLATFORMS FOR INVESTING
There are several online platforms that allow the buying and selling of stocks, bonds, and funds, often with low commissions.
- DEGIRO – Offers a wide range of investment products with low fees.
- eToro – Allows you to copy the strategies of experienced investors, ideal for beginners.
- Bank of Portugal – If you prefer more conservative investments, consider Savings Certificates and Treasury Certificates, available through the Bank of Portugal.
WHAT TO AVOID WHEN STARTING TO INVEST
- Avoid Herd Mentality: Don’t invest just because everyone is investing in a certain stock or sector.
- Don’t Give in to Short-Term Pressure: Investing is a marathon, not a sprint.
THE FUTURE WITH INVESTMENTS
Investing is one of the best ways to ensure a more secure and comfortable financial future. While it involves risks, with knowledge and a cautious approach, it can be a powerful tool to grow your wealth.
In the next edition, we will explore strategies for retirement planning and securing a peaceful old age by saving and investing early.
Financial literacy remains one of the keys to long-term financial success. Start slow, stay informed, and over time, you’ll see how investing can transform your future.
AUTHOR: Daniel Rocha Cardoso
SOURCE: MONTE-REDONDO E CARREIRA MAGAZINE (LOCAL MONTHLY – YEAR 15 // NO. 164 APRIL 2025)