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?
Invest - yes. Simplest investment is a savings account (not sure how they are called in Europe?) - you give your money to the bank, the bank pays you money for that. If you're not going to touch the money for a while, it's a no-brainer. But, of course, the profit you can gain this way is not large - in the US, for a short-term account (where you can take the money out anytime) it's about 3.5% per year, for longer terms may be more but not much. E.g. US Treasure I bonds now pay 4.26% but you have to keep the money there for a while (minimum 2 years). Certificates of deposit are offered by most banks and have varied terms and interests, but the idea is the same. If you limit yourself to respectable large banks, the risk is pretty much zero here.
The next step is stocks - here you can make more, on average 8% per year, and the simplest way would be to invest in a market-wide index fund. You should look for low-expense funds. With 8%, you'll more than double your money in 10 years. Of course, the risk is that stock market is volatile, so while on average it goes up, there could be long period - even years - when it's down. And unlike bank deposits, nobody guarantees you safe investment.
So, overall, yes, there is a point to invest money you're not using. How depends on your risk tolerance and time horizon. I'd avoid complex strategies until you understand them well, but even if you don't want to go into the weeds, it makes sense to invest at least in simplest ways. You would not make the maximum profit, but you would make some profit, which is better than just leaving the money to collect dust and earn nothing.
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