Do you have some money to invest but are unsure where to begin? The Portuguese Association for Consumer Protection (DECO) has a straightforward recommendation: "Do not leave money in your current account which has rates of virtually zero percent." If managing your finances is a challenge for you, remember that there are certain strategies that can help you.
DECO has ten suggestions on what you can do with your savings.
1. Prior to investing, pay off your debts
It's pointless to save until you've paid off your high-interest debt, because your savings will always be saved at a slower pace. We are not talking about long-term loans (like mortgage) but rather little loans (like credit cards) that wreak havoc on household budgets.
2. Pay attention to the information's source
“Friends” advise, or even the bank account manager's, should be avoided. Even if they aren't malicious, they aren't the most trustworthy or objective source, nor are they market experts. Pay attention to the growing number of digital influencers who offer advise. The CMVM* should accredit independent financial analysts, and sadly, an increasing number of people are unqualified to provide financial advise online.
3. Start putting money aside for your retirement as soon as possible
Even if the sums are tiny, starting a PPR as soon as you start working, your 20s is an ideal ages to start. It is more profitable not only because it has more years of savings and benefits from the capitalization effect, but also because it can apply to goods with a higher percentage of shares, but these come at a higher risk but it is possibly more profitable.
4. Consider the savings as a recurring fee
Don't just save what's left over at the end of the month; this way you risk not saving anything at all. You can, for example, schedule automatic payments like a direct debit to avoid "forgetting." It is better to think of the money you set aside as a personal investment that you will benefit from in the future.
5. Establish an emergency fund
It is critical to create an "emergency fund" before considering any investment, particularly one that involves risk. In practice, it is a financial cushion (equivalent to at least six paychecks) that allows you to deal with unforeseen events at any moment and avoid having to use your credit card, which typically has exorbitant interest rates in the double digits.
6. Inflation should be used as a benchmark for income
The rise in prices in the economy is referred to as inflation. If your savings value is smaller than the rate of inflation, your money is losing value, which can be quite destructive to your portfolio over time if this scenario is repeated year after year. As a result, we frequently hear the phrase "money is worth less and less." It is a horrible tactic to order with a large sum of money.
7. Investing in foreign products is a bad idea
Do not put your money into products you do not know about or understand. Structured goods, for example, contain complex regulations and are usually designed to show an appealing prospective payout, but they rarely materialize because they are dependent on the fulfillment of a number of conditions. These goods should be avoided.
8. Diversify your portfolio by using a variety of institutions and products
Do not put all of your savings in the same bank or product. Deposit only the amount covered by the Deposit Guarantee Fund (100.000€ per account holder) and the Investor Compensation System in each institution (25.000€). It's a method of lowering the risk.
9. Take a chance, but only with money that you do not require
On the items with the largest risk, apply just the amount you are confident you will not need in the near or medium term. Products that do not have capital guarantees, such as investment funds or shares, should only be held for durations longer than five years since they run the danger of going through a bad phase, with exchange rate drops, and should have time to recover and not be redeemed at a bad moment.
10. Select products based on your preferences
Even in terms of money, no two people are alike. Each has their own set of requirements and assets, as well as a unique risk profile. Some people cope well with risk, while others despise it. Know your risk tolerance, your level of acceptance, and the knowledge and time you have to research more sophisticated items and markets.
· Comissão do Mercado de Valores Mobiliários