All your questions about investing answered: How and what to invest your money in?

Have you decided that you too will dive into the world of investing (because you've heard somewhere that you should), but it's all a bit of a closed book to you? If you have no idea how and where to invest your money, this article is just for you. In addition to specific procedures for what to invest in, you'll learn why it can pay off for you and what mistakes to avoid.

Why invest

Investing isn't just an empty, ubiquitous buzzword of recent times. It's a tool that – when grasped correctly – will lead you to financial stability. Let's look at 5 specific reasons why it pays off for you to invest money.

1. Investing grows your money over time. In the long term, it's always better to invest money than to keep it in an envelope in the wardrobe or in a current account.
2. If you decide to invest in dividend stocks or in real estate, you can generate regular income without active work.
3. It helps you achieve long-term goals faster and more efficiently, such as buying a house, financing your children's education or a comfortable retirement.
4. Some investments, such as retirement accounts or government bonds, offer tax breaks.
5. Investing can lead to financial independence, which allows you to live without the need to work or to serve as a backup financial source in the event of unexpected events.

Are you telling yourself that you don't have hundreds of thousands set aside that you could now do without? That doesn't matter at all. That's what micro-investments are for.

Micro-investments and their place in the investment world

As the name slightly suggests, micro-investments are simply investments of small amounts (in the order of thousands). Why might this type of investment be advantageous precisely for you?

• Portfolio diversification: Even with small amounts, investors can spread their investments across various assets, which helps reduce risk.
• Education and experience: Micro-investments allow beginners to gain experience and learn how best to invest, even without major financial risk.
• Automation and ease: Modern platforms for micro-investing often offer automated investment tools that make managing investments easier.
• Opportunities for growth: Even small investments can grow over time thanks to compound interest and other investment advantages.

InvestBay is an exact example. You can invest in a selected property from as little as CZK 2,500, and then enjoy both regular rental income and profit from the sale. We are transparent, we explain everything in understandable language, and as a bonus you receive a direct discount on accommodation in our more than 300 apartments across Europe! Read about how InvestBay works.

The basic principles of investing

How and where best to invest your money

Investing money is a complex topic that depends on many factors, such as your financial goals, risk tolerance, time horizon and current financial situation. Here are a few basic steps that can help you get started:

1. Research and a basic overview: It always pays to have this, especially for understanding what is worth investing in or what you are investing in. If you decide to invest in stocks, you are investing in a company – and therefore your money grows if the company does well. In the case of real estate, you are investing in something that shows stable growth over the long term (demand rises over the long term, but supply does not). It will also be advantageous to educate yourself in the basic investment vocabulary and learn terms such as ROI (return on investment), liquidity or volatility, as well as the costs of short-term and long-term capital gains tax rates.
2. Set up a personal financial plan and define your goals: Decide why you want to invest. Do you want to save for retirement, buy a house, or just increase your wealth? This too will help you determine the direction of how and what to invest in.
3. Assess your financial situation: Make sure you have a sufficient reserve for unexpected expenses and that you are able to invest money you won't need in the short term.
4. Determine your risk tolerance: Risk tolerance is, in other words, the measure of how well you can manage your emotions. If you decide to accept higher risk (and therefore a higher return over time), it means you'll endure not selling your share in the event that the value of the investments drops significantly. Perhaps even by 70 %. It is therefore necessary to make sure whether you primarily prefer a higher return in 10 or 20 years (but you don't really mind what the journey towards it looks like), or whether above all you never want to be in the red – that represents lower risk.
5. When you're deciding what to invest your money in, it's almost always a compromise that you are or are not willing to accept.
6. Diversify your investments: Don't put all your money into one type of investment. Spread it across various types of assets, such as stocks, bonds, investment properties and others.
7. Choose an investment strategy: There are many different strategies, from conservative to aggressive. Choose the one that best matches your goals and risk tolerance.
8. Keep educating yourself: Investing is a long-term process and it's important to keep educating yourself and following the market.

There are also differences in the style of investing in an asset. You can:

• invest directly
• use crowdfunding
• use crowd-owning, that is co-ownership

An example of a specific investment strategy by amount

How and where to invest CZK 10,000

Step 1: Defining goals and a risk profile

1. Set your goals: Decide what you want to achieve with the investment (e.g. short-term saving, learning about investing, building capital).
2. Risk profile: Determine what risk you are willing to take (conservative, balanced, aggressive).

Remember that there is no single way to invest money correctly. You can invest ten thousand in a single asset, or if you want to maximise returns while minimising risk (and at the same time learn something from such an investment), you can use this strategy:

Step 2: Building a diversified portfolio

An example of portfolio allocation:

• 40 % – stocks or ETFs: CZK 4,000
• 25 % – mutual funds: CZK 2,500
• 25 % – crowd-owning of real estate with InvestBay: CZK 2,500
• 10 % – cryptocurrencies: CZK 1,000

Although InvestBay allows you to start at such a low amount, you can of course invest more. Thanks to the transparency of the whole platform, any concerns will leave you very quickly.

Step 3: Implementing the investment plan

1. Opening investment accounts
   Choose a reliable online platform or brokerage firm and open an investment account. Each of the assets has a different place / platform / account where you invest money.
2. Investing in stocks or ETFs
   Set up an account with an online broker (e.g. Degiro, Fio banka).
   Invest CZK 4,000 in stocks or ETFs that track broad market indices (e.g. S&P 500 ETF, MSCI World ETF).
3. Buying mutual funds
   Choose mutual funds managed by reputable investment companies (e.g. Amundi, Conseq, ČSOB).
   Invest CZK 2,500 in mixed or equity mutual funds.
4. Crowd-owning
   Register on InvestBay and verify your account.
   Choose a property that interests you and invest the minimum possible amount, which is CZK 2,500.
5. Cryptocurrencies
   Open an account on a cryptocurrency exchange (e.g. Binance, Coinbase, Coinmate).
   Invest CZK 1,000 in more stable cryptocurrencies such as Bitcoin or Ethereum.

Step 4: Regular maintenance and review of the portfolio

1. Tracking performance: Regularly (e.g. quarterly) check the performance of your portfolio.
2. Rebalancing the portfolio: If some investments deviate significantly from the original plan, carry out rebalancing in order to maintain the desired allocation of assets.

If you don't want to deal with the investment world so much, with a well-chosen product you practically don't have to do anything anymore – at most check whether the money is going into your account.

If, however, the world of investing interests you, definitely make use of the many education options. Many online courses and articles are available for free, or alternatively make use of a consultation with a financial advisor or investment specialist in order to maximise returns and minimise risks.

Likewise, don't forget to keep funds in a liquid reserve in case of unexpected expenses (e.g. in a savings account).

How and where to invest CZK 500,000

We've examined investing a smaller amount. Let's now look at a strategy for investing half a million, which you can, however, also apply if you're interested in what to invest CZK 100,000 in or how and where to invest a million. Many of the steps will be similar; the portfolio in particular will differ significantly.

Step 1: Defining financial goals and a risk profile

The same as above

Step 2: Building a diversified portfolio

A balanced investment strategy can look as follows:

• 25 % stocks: CZK 125,000
• 25 % mutual funds: CZK 125,000
• 20 % government bonds: CZK 100,000
• 20 % real estate (real estate funds or crowd-owning): CZK 100,000
• 10 % alternative investments (P2P loans, cryptocurrencies): CZK 50,000

Step 3: Implementing the investment plan

The same as above

Step 4: Regular maintenance and review of the portfolio

The same as above + adjust the strategy according to changes in your life, your financial goals and market conditions.

Step 5: Hedging against risk

• Insurance: Get suitable insurance (life insurance, property insurance).
• Emergency fund: Keep part of your funds in a liquid reserve in case of emergency (e.g. in a savings account).

Two essential pieces of advice for beginning investors

Don't time the market

Our main piece of advice is: Don't wait, and start. Don't wait until the interest rate is lower, "until it drops", until the CZK/EUR exchange rate is better, until… This applies especially to those who are thinking about investing over the long term (10 years and more).

Especially with real estate, it's said that "The best time to invest was 20 years ago. The second best is today." The sooner you start, the sooner your money can grow, so consider whether you'll set off into the world of investing as soon as possible.

Try to stay calm when markets fall

Financial markets are a bit like a roller coaster, and you'll experience a lot of ups and downs along the way. And as an investor you have to come to terms with the fact that you won't know when, what and for how long it will come. Of course, seeing markets fall can be stressful, but when it happens, it's important to stay calm. If you sell your investments during a fall, you'll effectively lock in your losses.

If you stay calm and resist the urge to sell, your losses will remain hypothetical – it will only be a number on your dashboard, so if the markets bounce off the bottom, it may happen that the value of your investments rises and you ultimately achieve a profit over the long term.

Also read our three-part interview, which will introduce you to the world of investing.

Part 1: Andrew Thompson: After 27 years in real estate, I know how to minimise risks for investors

Part 2: Andrew Thompson: When selecting a property, the quality of the data is key

Part 3: Andrew Thompson: Watch out for the biggest mistake people make when investing in real estate

Whether you're interested in how to invest 100 thousand, 200 thousand or a million advantageously, we hope you've found in this article what you came here for.

This article serves for informational purposes only and does not constitute an investment recommendation. Before any investment decision, we recommend consulting a financial advisor. Investing carries risks and it's important to thoroughly consider all aspects before investing.