Investing money for beginners: 5 helpful rules (+ step-by-step guide)

Many people still hesitate to invest their money profitably. Too many options, insufficient knowledge or low motivation are just a few of the reasons. In this article, we will show you that investing money doesn’t always have to be complicated.

In brief:

  • Investing is very important, even at a young age, and can provide you with a good reserve for later in life – so get to grips with the topic while you’re still young.
  • Many new investors, or those who want to become one, especially as a beginner you shouldn’t focus on the many different asset classes.
  • As a beginner, you learn best from those who already have a little more experience. That’s why I’m giving you 5 golden rules to follow, so you don’t have to make the same mistakes I did.

That is why it is important to invest (early)

We often talk about the importance of starting to invest and potentially build up wealth as early as possible. Why exactly do we do this? Well, there are various reasons. A long investment period can have a wide range of advantages:

One of the most important issues is probably private retirement planning. In recent years, the pension level, i.e. the ratio between the standard pension and the average annual salary, has continued to fall. So we have less money available at the end of our lives than we do during the time leading up to it. As current statistics show, almost half as much:

In order to maintain the standard of living to which you are accustomed in your previous life, you will need a private pension plan in addition to the state pension. This can and should consist of sensible investments. Logically, the earlier you start investing, the better.

In addition to retirement planning, the compound interest effect also plays an important role. You receive interest on your investment. With shares, for example, this interest takes the form of dividends paid by the companies. The effect that occurs every time you reinvest the interest from your investment and receive interest on your interest is called compound interest. Your capital grows by itself through the resulting return, even without further monthly deposits. Here is an example of an investment of 10,000 euros at an interest rate of 5%.

Source: Comdirect

There are many reasons to start building your wealth early, including retirement planning and the power of compounding interest. A longer investment period offers more opportunities to diversify risk and benefit from long-term market trends. Inflation can also be counteracted over the long term. If beginners start saving and investing early, it can help to at least preserve the value of their money over time, but ideally to increase it.

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Investing money for beginners: 5 practical rules

On the occasion of my 10-year investment anniversary, I looked back on the past. I asked myself, “What would I do differently today if I started over?” From this, I came up with 5 rules that I would definitely follow to get an optimal kick-start towards building wealth.

Rule 1: Increase your risk tolerance.

If you are at the beginning of your investment career, you probably don’t have much capital available. Let’s assume that you are in your early 20s. Admittedly, your income is rather limited. But the same applies to your responsibilities. In most cases, you only have to take care of yourself and your desires/priorities.

These circumstances are likely to be unique in your life. Take risks – if not now, when? If we stick with the topic of investing – instead of the classic 70/30 investment in an ETF, you could also try investments like cryptocurrency. Your investment ultimately has much less downside potential than that of investors of advanced age and more responsibility.

But be careful: of course, we are talking here about calculated risks. You shouldn’t invest all your money in high-risk crypto trades just to get the highest possible return.

A calculated risk would be, for example, a cryptocurrency savings plan. If you are interested in the topic, please read the corresponding article “Crypto savings plan comparison”.

2nd rule: Automate your wealth accumulation

To ensure that you invest regularly and don’t get the idea of waiting for the “right moment” with your investment, it’s worth setting up a savings plan. This automatically invests a monthly sum of your choice in an asset class of your choice. To avoid the temptation to not invest the money for a while, the execution of your savings plan should be quite close to the day on which you receive your salary. For example, always at the beginning of the month.

There are many different savings plans from a wide range of providers. If you want to get a good overview of the current options, we recommend our comprehensive savings plan comparison 2025!

Rule 3: Don’t gamble, invest

You should never (!) make your income dependent on a single asset class. If you do this, you are at the mercy of the performance of the share or asset class. Nobody can predict the future. So instead of relying on a single asset class with all your belongings, you should definitely diversify your portfolio!

The most beginner-friendly way to do this is through ETFs. These automatically invest in different shares, which are selected according to certain characteristics. If you are interested in ETFs, check out our comprehensive beginner’s guide to ETFs for 2025.

4th rule: Maximize your income

To grow your wealth quickly, you need capital. With a long-term investment strategy using a savings plan, it doesn’t have to be the largest one-time investment, but you will need a certain amount on an ongoing basis to cover all of your costs and your investment amount.

For this purpose, you need a continuous, preferably somewhat higher income. My tip for you is: Consider whether you could have done your current main job as a part-time job and become self-employed. By becoming self-employed, you can build up a second source of income and create a secure cushion for yourself should you ever lose your current main job, for example.

If you are still unsure how you could build up an additional passive income, please watch our video on the topic or read our blog post “Build passive income”.

5. Repay your debts.

Before you start building your own wealth, you should first take a look at your current financial situation. Do you owe anyone money (e.g. a student loan)? If you start building wealth, you should start paying off these debts at the same time.

Of course, you shouldn’t let any existing debts stop you from investing. However, it makes sense to start working on canceling these debts at the same time. Because believe me – the feeling of finally paying off long-standing debts is extremely liberating and highly recommended!

And that’s the end of our five tips. If you’d like to find out more, feel free to watch the corresponding YouTube video. You’ll also learn my secret extra rule there!

Investing for beginners – 6 steps to successful investing

With the above tips, you are well equipped to start investing. Now you just need to know how. To help you start your investment career with confidence and excitement, we have put together an exclusive step-by-step guide to help you get started with building your wealth.

Step 1: Identify potential savings and determine the amount to be saved

Before you start investing wildly in shares, you should first take a good look at your financial situation. What options do you have? Do you have debts to pay off at the moment? You should also thoroughly research the possible investments. Remember that investing in the capital market always involves a certain amount of risk. Shares and ETFs are subject to fluctuations and do not necessarily have to be profitable.

It is also advisable not to rush into anything and only to invest as much money as your financial situation allows. Among other things, you should always take into account your monthly fixed costs and a nest egg for unforeseen expenses. In addition, it makes sense to prioritize the repayment of existing debts, for example from a loan.

If you’re not sure how much money you can invest, just follow the 50-30-20 rule. This states that you should invest or save about 20% of your income. If you want to find out more about this rule, please read our article on “How can I save money every month”.

Step 2: Choose your investment strategy

The goal of your investment is particularly important for the subsequent selection of your investment and the overall structure of your investments. When and for what do you need your assets? The 3-pillar savings model can help you determine your investment goal. This will give you a good overview of your short-, medium- and long-term future projects. There are 3 pillars:

Pillar 1: retirement pensionPillar 2: Your own wishes Pillar 3: Financial reserve
Enjoying a relaxed and peaceful retirement – this is only possible with a sufficient financial cushion. The rule: the more money that goes into your retirement savings, the less you will have to cut back on your standard of living.Whether a house or a dream car is a medium- or long-term wish is debatable. One thing is clear: dreams also have to be financed somehow.
The best way to do this is with the help of a simple financial plan that sets a time horizon for your savings goal.
Would you be able to pay for a new washing machine or an expensive repair to your apartment on the spot? To be financially secure, you should definitely save a nest egg.

Depending on the importance of the pillars, you now have to decide how much money should be saved for each pillar and how this affects your investment. For the rest of this article, we will assume a long-term investment strategy, for example for your retirement provision.

Step 3: Select investment

If you have been following our blog for a while or have read the article carefully, you will have noticed the asset class of ETFs. These are so-called exchange-traded index funds, also called passive funds. They track a specific index of listed companies and their shares. When you invest in an ETF, it automatically diversifies your investment across different companies.

To successfully invest money as a beginner, you need an investment that fulfills the following requirements:

  • No extensive prior knowledge is required.
  • low costs
  • low risk
  • even small savings amounts are possible
  • No or only a small amount of start-up capital possible
  • no great effort

ETFs fulfill all these criteria. In addition, they offer exceptionally good returns of 8% per year on average. One example of an ETF is BlackRock’s MSCI WORLD. It has seen an increase of +336% in recent years and is considered one of the most popular ETFs in the world.

Important master data Values
Issuer BlackRock Asset Management – ETF
Issue date25.09.2009
Distribution typeAccumulative
Total Expense Ratio (TER)0,20 %
Fund size73.614.823.809,71
Replication typePhysically optimized

Of course, you are not limited to ETFs. Alternative asset classes include actively managed funds, bonds, P2P loans, and even “classic” investment models such as instant-access and fixed-term deposit accounts. However, ETFs are convincing across the board and are considered the asset class of the moment.

Step 4: Open a custody account

To make an investment, you need a securities account with a bank or a broker. A securities account is similar to a bank account in which your capital is held. This is how you proceed:

Step 1: Choose a bank or broker

Every bank and every broker offers different conditions. You should compare them yourself and see which broker offers you the best conditions at the moment. To give you an idea of such a comparison, we have compared three of the most popular brokers in terms of important features:

Freedom24Scalable CapitalTrade Republic
Depot managementFree of chargeFree of chargeFree of charge
order costsDomestic order 2 € + 0.02 € (per share)gettext €0.99; XETRA €3.99 + 0.01 percent (min. €1.50)LS Exchange 1 €
order fees2 + 0.02 (per share)0.99 € except iShares, Invesco, Xtrackers; ETFs for 0 € from 250 € order volume1 €
ETF and equity savings plansNot possible.Free of chargeFree of charge
Interest3.62 % per year0 % / 4 % in Prime+3,75 % per year
ETF savings plans Number2.0001.900
Shares Number40.0007.5009.000
ETF quantity1.5002.5002.400
field reportsFreedom24’s experienceScalable Capital’s experience Trade Republic’s experience

Step 2: Select asset class

Now you have to select the asset class you have just decided on. Before you open a securities account with a broker or bank, you should definitely check whether you can even trade your desired asset class with the provider.

3. Set up a savings plan

As you can see from my tips, you should definitely invest with a savings plan. Now is the time to set one up. Depending on the provider, you can do this for free or you have to pay a fee.

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Step 5: Your first investment

Congratulations – you are now officially an investor. There isn’t much left for you to do. Just sit back, relax and check on your portfolio from time to time. But don’t panic. Fluctuations in prices and even longer lows are quite normal for equity investments.

After a typical investment period of 15 to 20 years, you can withdraw your assets or restructure them. However, there is still a lot of time before then. For now, it’s time to relax and sit back!

Conclusion: investing is not rocket science – at least not with the right guidance.

At first glance, investing for beginners seems very complex. Nevertheless, it is extremely worthwhile to start investing, especially at a young age. Ultimately, your retirement provision and your total assets depend on it. If you follow my tips and our guide, nothing stands in the way of successful investing. The most important thing is to diversify your portfolio and set yourself goals at the same time.

So, what are you waiting for? Would you like to learn more? Read our articles on the topics “Gold price forecast”, “US government bonds 10 years” or “ETF Asia” and become a financial expert!

FAQ – Frequently asked questions

About our author

Aleks Bleck is the face of Northern Finance and was already a shareholder, lender and ETF investor at the age of 18. His focus is on P2P loans and passive ETFs. Aleks founded Northern Finance in 2017 while studying business administration in Lu00fcneburg.

He built up the YouTube channel alongside his main job in investment and corporate banking before finally focusing full-time on Northern Finance.

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