e-Learning Hub | Digital financial literacy: be smart with your money in digital age
Awareness raising and motivation workshop >> Interactive readings >> Safe investing for future at digital age
How to invest your money?
INTRODUCTION
Today, investment has become an essential tool to grow our money and secure our economic future. Investment is the spending of your money on an asset (something that is owned by a person, company or organisation, such as money, property, or land) with the objective of obtaining an economic benefit in the future.
By investing, you are “putting your money to work for you”, rather than keeping it in a savings account. Investing can be in a variety of assets, such as stocks, bonds, real estate or even your own business.
There are a number of key reasons why many people consider investing:
- Investing offers you the opportunity to grow your money over time.
- By investing, you can earn money that compensates the rate of inflation (It is the generalised rise in the prices in an economy over a period of time) and this way your money does not lose value over the long term.
- Whether you want to buy a house, fund your children’s education or retire comfortably, investing will help you achieve your long-term financial goals.
Tips to start to investing
Set clear financial goals: Before you start investing, it is important to have clear financial goals in mind.
- Research and diversify: Diversification, which is spending your money in different types of investments, reduces risk and increases the chances of constant profits.
- Learn to manage risk: Define your risk tolerance and set clear limits to avoid impulsive or emotional decisions.
- Ask a professional for help: If you are worried or unsure about your investment decisions, consider asking for help from a financial professional.
- Continuously educate yourself: The investment world is constantly evolving, so it is important to stay up-to-date and keep learning. Read books, attend seminars, follow investment experts and keep up with economic news.
Difference between saving and investing
Saving is the action of saving part of your income in order to maintain a balance between your needs and your financial capacity. It is a fundamental tool for maintaining a financial balance in the short and long term. It is seen as a way of planning and organising your future.
Investing is the action of putting your money into a business activity with the expectation of making a profit, gain or additional income. Any expenditure can be an investment if its objective is to make a profit from it.
The investment value
The Investment value is determined by the ability of the service or assets you invest in to satisfy the consumer’s need.
Investment value is key to making informed and profitable financial decisions. By assessing the investment value, you can identify potential opportunities and determine whether or not an asset or project is a viable option. It also allows you to compare different investment options and select the one that offers the highest potential profit.
In addition, considering investment value helps to minimise risk, as it is based on an analysis of factors such as past performance, market stability, future projections and possible adverse scenarios. This provides a more complete and realistic view of the benefits and risks associated with an investment.
The investment value is essential to make informed decisions, maximise profits and minimise risks. Without considering this aspect, investments can be risky and unprofitable.
What is the risk tolerance?
Risk tolerance refers to how much risk you are willing to take with your investments without feeling uncomfortable or anxious. Everyone has a different risk tolerance and it can vary depending on personality, previous investment experience and financial goals.
Risk tolerance is your ability and willingness to accept a decline in the value of your investments. In trying to determine your risk tolerance, you should ask yourself whether you would be comfortable holding your positions if the stock market were to experience a sharp decline.
By knowing your risk tolerance, you can develop a strategy for your investments that will help you balance concerns about instability with the potential for higher benefits.
The digitisation of finance and investments
Today, if you want to know the status of your accounts, you do not have to go to the bank office to update your passbook. All you have to do is go to your bank’s mobile or web application. There you will have all the information you want to know.
This makes it possible to increase supply and make it easier for investors to find products that meet their demands and desires. Online investing allows you to buy, sell, and trade various financial instruments, such as stocks, bonds, and funds, all from the comfort of your own laptop or smartphone.
Security and investing in the digital era
In this digital age, where hackers are becoming more and more numerous, the security of your financial information is very important. Look for platforms that employ strong security measures, such as encryption technology and two-factor authentication, to keep your data secure. After all, you do not want your hard-earned money falling into the wrong virtual hands.
Risks of investing online
As with any investment, there are risks involved. Market fluctuations and economic uncertainties can cause you to feel nervous and make premature decisions. It is essential to approach online investing with a balanced mindset, keeping your long-term goals in sight and not getting swept away by short-term market changes.
Questions for self-assessment
SOURCES
Quintero Antonio. 2024. Definición de invertir. (Definition of investing). Available at: https://economiasimple.net/glosario/invertir
Vega Carlos. 2024. Conceptos básicos de inversión: guía completa para principiantes. (Basic investment concepts: complete beginner´s guide). Available at: https://aprendeeconomia.info/conceptos-basicos-de-inversion/
Investor. 2023. Tolerancia al riesgo: ¿Qué es y por qué importa en las inversiones? (Risk tolerance: What is it and why does it matter in investment?). Available at:
https://theinvestoru.com/blog/que-es-la-tolerancia-al-riesgo/
Borja Alejandro. 2024. Tolerancia al riesgo, qué es y por qué es importante. ( Risk tolerance, what it is and why it is important). Available at: https://finantres.com/que-es-la-tolerancia-al-riesgo/.
Rodriguez Alberto. 2024. ¿Cómo y cuándo empezar a invertir? Guía práctica. (How and when to start investing? A practical guide). Available at: https://roams.es/finanzas/academia/inversion/#consejos-empezar
Popcoin. Bankinter. 2021. ¿Qué diferencias existen entre ahorrar e invertir? (What are the differences between saving and investing?). Available at: https://www.bankinter.com/blog/finanzas-personales/diferencias-ahorrar-invertir-tabla
Livetopics. 2020. Diferencias entre ahorro e inversión ¿Qué me conviene más? (Differences between savings and investment. Which is better for me?). Available at: https://blog.livetopic.es/2020/05/14/diferencias-entre-ahorro-e-inversion/
Torres Sofia. 2024 ¿Qué es el valor de inversión? Definición y beneficios. (What is investment value? Definition and benefits). Available at: https://aprendeeconomia.info/valor-de-inversion-definicion/#4_cuales_son_los_principales_riesgos_asociados_al_valor_de_inversion_
GMB. 2022. Valor del dinero en el tiempo: importancia para tus inversiones. (Time value of money: importance for your investments.) Available at: https://gbm.com/academy/valor-del-dinero-en-el-tiempo-importancia-para-tus-inversiones/
BBVA AM España. 2024. Diversificar para lograr nuestros objetivos, en la inversión como en la vida. (Diversify to achieve our goals, in investment as in life). Available at: https://www.bbvaassetmanagement.com/es/actualidad/diversificar-para-lograr-nuestros-objetivos-en-la-inversion-como-en-la-vida/
Generali. 5 consejos para tener en cuenta antes de empezar a invertir. (5 tips to keep in mind before you start investing). Available at: https://www.generali.es/blog/generalimasqueseguros/como-empezar-a-invertir-desde-cero-bolsa-acciones-inversion-segura/
