Invest correctly – wealth accumulation 2025

The high inflation rates devalue your own assets. You can no longer buy the same products and services with the same money today as you could a few years ago. Another problem is the uncertain state pension. But how should private households deal with such financial uncertainties?

Investing money is a practical option. We show you how to invest properly and how you can start building up your personal wealth – take your finances into your own hands!

Investing correctly – What do I need to consider?

Investing for beginners can seem complex and confusing, especially at first. After all, there are numerous investments and different rules that should be followed. That’s why we’re giving you an easy-to-understand overview of important basics that you should bear in mind if you want to build your own financial strategy.

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1. Magic triangle of investment

The so-called magic triangle of investment helps investors to get a rough overview of certain investments and their advantages and disadvantages. The triangle can be used to assess whether an asset is suitable for your own portfolio and whether it matches your individual goals or not.

The triangle consists of the most important objectives or requirements that different investors have for an investment if they want to invest properly: Liquidity, profitability and security.

The following is important:

• No investment can fulfil all three objectives perfectly
• The focus is usually strongly on one or two objectives
• You should be clear about what your personal priorities are in an asset class, what you place less value on and what your risk appetite is
• You can then categorise the available investments and decide on an asset

Liquidity: This word is used to describe how easily you can access the money you have invested. For example, if you have taken out a building society savings contract for a certain number of years, the liquidity is low as you are tied to fixed times and cannot simply withdraw the money. In contrast, a call money account gives you a high degree of flexibility.

Profitability: An investment is profitable if you can achieve high profits or returns. The time you invest is particularly important here. The longer you invest your money, the higher interest you can earn. Risks are also reduced. Another advantage is that inflation can be compensated for with a correspondingly high return, which means you can protect your assets from losing value.

Security: Investments are associated with various risks. Investors differ in their risk appetite.

You should ask yourself the following questions:

• How much money am I prepared to risk?
• How can I increase security?
• How do I find a crisis-proof investment? or
• How important is security to me when investing?

2. Diversification

One of the easiest tools to implement in order to increase the security of your portfolio is diversification. This involves spreading or splitting up your assets.

Diversification is important if you are interested in safe investments and can be used to divide up the following levels:

• Portfolio: Diversification works, for example, by investing in different investments and not putting everything into shares or an overnight money account
• Companies: If you invest in a few individual shares, your risk is comparatively high. If a company goes bankrupt, you will be able to clearly feel this in your portfolio. The solution? Invest in a large number of companies. In this way, individual insolvencies can be ‘absorbed’ by other companies
• Sectors: It can be risky to invest a large proportion of your assets in a particular sector. The future and development of different sectors cannot be predicted. If you only invest in one specific sector, your assets may be jeopardised in the event of negative developments
• Countries: National crises can also have a major impact on investments. If, for example, there is an economic crisis or an environmental disaster, it would be better for your portfolio not to have invested in just this country
• Investment horizon: Investors can often reduce the risks of financial investments by investing with a long-term investment horizon. However, some of the money should be liquid, i.e. easily available if, for example, the washing machine suddenly breaks down or the car needs repairs. By investing in asset classes with different investment horizons, you can ensure that you reduce risks while having enough money available in case of unforeseen expenses

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Beware of ‘insider tips’

The internet offers an excellent opportunity to educate ourselves and learn about topics we know nothing about. Unfortunately, however, there are also numerous dubious providers who do everything they can to profit. They often have no regard for private investors and the possible consequences.

So be wary of supposed experts who want to tell you how to invest and get rich quickly. They often give dubious financial tips and sell them as supposed ‘insider tips’.

Scrutinise your source of information and ask yourself questions such as:

• Does the provider provide information on the advantages and disadvantages of certain investment options?
• How much transparency am I offered?
• Is the information balanced or am I being pressurised to invest in a particular course or investment?

3. Investment horizon

The insider tips just mentioned for supposedly getting rich quick bring us to the topic of investment horizon. This has a decisive influence on the risk and return of an asset class and financial strategy.

• Risks can often be significantly reduced through a long-term investment horizon
• Market fluctuations or unfavourable entry prices are thus balanced out
• For shares or ETFs, for example, you should bring enough time with you
• With an investment horizon of at least 10 to 15 years when investing in ETFs, you can absorb risks

Long-term investment horizons are therefore particularly important if you are investing in assets that are subject to market fluctuations and risks. Such periods are less important if you need an investment that you have regular access to, such as an overnight money account.

4. Reserve funds

Investing all your assets in order to maximise returns? Unfortunately, this rarely works in practice and can even lead to problems. It is highly recommended that you build up a reserve fund before you start investing money.

But what is the reserve fund for? Sudden events can occur time and again that require people to spend money.

Emergencies and other expenses are varied and cannot be planned:

• Repairs in the house or flat
• Sudden veterinary costs
• Broken electronic devices
• Illness
• Temporary unemployment

It should be possible to finance these with your own reserves. As an investor, it can have negative consequences if you need money prematurely and therefore have to sell shares of your invested assets. If prices are unfavourable, for example, you may incur high losses.

This means you are well prepared should you need money spontaneously. Ideally, you should build up your reserve fund before you invest money and replenish it when you have used some of it up.

5. Reduce costs

Reducing the costs associated with your investment is a very basic tip if you want to invest properly. There are numerous options on the internet. Cost comparisons help you to find the best options for your investments.

For example, if you are looking for a bank, the custody account management should be free of charge. This way, you can be sure that your return will not be reduced. Such costs can be particularly noticeable over longer periods of time.

Compare running costs in particular for certain investments. Transaction costs can also be high depending on the investment and can make a big difference. The lower your costs are, the more you can benefit from the compound interest effect and the higher your return will be.

6. Pay off debts

In one of the previous points, we mentioned that it is advisable to build up a reserve fund before investing money. Debts that involve high interest rates should also be paid off in advance. This includes credit card debt, for example.

This does not apply to planned, long-term loans, such as a building loan. Alongside such a loan, you can easily start investing on the side. Otherwise, investors would only be able to start investing money in a few years or decades. This does not make sense, as time plays a decisive role.

7. Develop your own strategy

Every new investor starts by setting goals and planning. You can only achieve your financial goals if you know them.

Ask yourself a few questions, for example:

• What is the goal of my investment?
• By when do I want to achieve this goal?
• How much money do I need to invest to reach my goal?
• Do I have different goals?
• What risks do I face?
• How can I protect myself from them?
• How realistic are my goals?

The last question in particular is related to the actual planning. You should build an investment strategy by reviewing your goals for realisability and being clear about which investments you want to use.

Choose your investment

After all these basic rules, the question is still ‘what to invest in?’. If you have studied the previous aspects of this article in detail, in particular the magic triangle of investing and your financial goals, you may already have a first impression of what your investment should offer you.

In the following, we will introduce you to a few investments and their rough structure. However, we will limit ourselves to a few important ones and leave out others so that you can gain an initial overview.

ETFs

You can determine the period yourself, but you should be aware that your money is not always available. Deposit protection of up to 100,000 euros per customer applies to both account types. Company goes bankrupt. Diversification is therefore particularly important for such asset classes.

Exchange traded funds or ETFs are an interesting way of combining security and returns. It is a fund about a specific type of investment such as shares, bonds or commodities.

• An ETF attempts to replicate a specific index, such as the DAX
• In this case, the fund would contain all 40 of the largest German company shares
• It is a passive, long-term orientated asset class
• The particular advantage of ETFs is their high level of diversification
• So-called global portfolios contain several hundreds or thousands of companies, consisting of just one or two ETFs
• They are transparent and easy to understand

It is perhaps the best investment without risk if you pay attention to sufficient diversification. The risk is therefore spread across a large number of groups, which makes the asset class much safer with the opportunity for attractive returns.

Call money and fixed-term deposits

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The call money account is ideal for storing your emergency savings. It is very liquid and you can access your deposited money at any time. If an emergency arises, you don’t have to worry about whether the withdrawal will work or whether it will only be possible at a later date.

Another advantage is that interest is sometimes paid. However, these are not particularly high and are not suitable for building up assets. The points of security and liquidity are high, while profitability is low.

Shares

One of the most popular ways to achieve attractive returns is through shares. By buying a share, you can acquire a stake in a listed company. The aim is to benefit from the company’s performance and sell the shares at a higher price at a later date.

• The purchase of shares is accompanied by different rights
• Depending on the type of share, you may, for example, have the right to attend a meeting and exercise your voting rights
• At such meetings, for example, votes are taken on whether companies should pay out their profits to their shareholders in the form of dividends

Are you interested in safe shares? Risk and return always go hand in hand, even with shares. If you invest exclusively in a few individual stocks, this can be particularly noticeable if one of these

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P2P loans

P2P is a form of lending between two private individuals. As an investor, you have the opportunity to finance private projects and benefit from the interest. There is no need for a bank and therefore no time-consuming, bureaucratic hurdles.

If you want to invest in P2P loans, you can sometimes achieve high returns. Here too, risk and return go hand in hand. However, you have the advantage of being able to build your own individual strategy in line with your personal risk appetite.

P2P platforms rate borrowers and their loans with a credit rating. This serves investors and is intended to increase transparency and security. In this way, investors can assess whether they want to take the risk for a particular loan or prefer to concentrate on secure loans. For example, you can invest in European loans.

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Conclusion: Investing the right way made easy – here’s how!

At the beginning, the topic of investing can seem a little overwhelming. You may be afraid of losing money or not yet have an overview of the many options. That’s why we’ve introduced you to a few investments that are beginner-friendly and suitable for different goals.

We have also shown you important basics. These include, for example, the magic triangle of investing, which helps you to categorise asset classes. Diversification is one of the most important tools and helps you to reduce the risk of your investments. You should also steer clear of supposed insider tips, which are often dubious.

If you build up a emergency fund before investing, you can cover financial emergencies from your own reserves and don’t have to worry about your invested assets. Debt should also be paid off in advance if possible.

If you follow these tips and basics, nothing will stand in the way of you building your wealth and achieving your financial goals! Expand your knowledge and build a strategy that you follow consistently so that you can invest properly. Want to learn more about P2P loans? Learn more here!

FAQ – Frequently asked questions