Since a lot of us here have expressed interest in not starving to death in a gutter, I figured I'd start a weekly thread to discuss financial matters.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
Jump in the discussion.
No email address required.
Notes -
Let's say I managed to save up around 5000€. Is there any point in investing a sum that small? What if we also assume that another 5000€ join it every year?
Is there a point in not investing that sum?
Commissions (trade fees) are pretty small these days. Pick a cheap online broker if you want to pick stocks yourself, or a cheap passive index fund (the annual fee can be absolutely tiny, like 0,1%).
Putting less than 500 in an individual stock becomes a bit silly, but with 5000 you can diversify somewhat (a handful of stocks) and still have it be worthwhile.
Can you recommend a good guide on how to get started with zero prior knowledge of investing?
Having it available in case some major household appliance breaks, or the car, or we need to organize a move.
I looked up a newbie guide and skimmed through it for you. I've watched a few of this guy's videos before. He knows his stuff and seems honest.
https://youtube.com/watch?v=bqPSFw1eiNc
Watch the first hour. The rest is US specific tax stuff.
If you are going to become any good at this stuff though, there is no single guide that can be followed. Just like there is no single guide to becoming a doctor or any other profession. There is a lot to learn, and many sub-sections. If you are going to be an active investor with a good chance of success, you will need to read a bunch of books thoroughly and study for at least a few hours per week over a few years.
The emergency fund should generally not be invested. Definitely set alerts and/or stop losses if you do invest it. General advice: Investing without a pre-defined risk and a stoploss is like driving without any brakes. Investing 5000 does not mean you are actually risking the 5000. With a stoploss of 10%, and a catastrophic market crash of -10% in a single day, you will be getting out (if you have any sense) with a loss of 500. That, those -10 percent, is your risk. Always pre-define your risk and cut your losses short instead of freezing up with indecision.
That's not at all general advice, that's typically considered a rather bad idea. Unless you're betting on single stocks you're not even that confident in, the market is going to recover from any fluctuations and you want to ride it all the way back up after any drops. General advice is to buy basic index funds and try to minimize how often you even look at them, trusting in the long run returns.
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