Debitum proves that size isn’t everything. My experiences with Debitum show: Here you can count on more than 11 percent return (after deductions of possible failures)! How this works, what advantages and problems there are and what you should pay attention to, I’ll show you in my experience report. In brief: Debitum is a P2P […]
Investing money properly – these investments will pay off in 2025
Uncertain state pensions, high inflation rates and prices, long-term goals – there are numerous reasons to invest and grow money. Are you also dealing with these issues and want to start investing your assets, but don’t know where to start? In this article, we have summarised the most important basics so that you can learn how to invest money properly!
In brief:
- Would you like to start investing your assets but don’t know how?
- If you have familiarised yourself with these 8 tips, you already know the basics.
- We show you what the magic triangle of investing is and how it can help you to assess an asset class
- Depending on your goal and priorities, you could benefit from these asset classes
Investing made easy – follow these basic rules
Before you can decide on an investment, you should first familiarise yourself with the basics. Investing only works if you have built up a basic knowledge and have an overview. In the following, we will show you what the so-called magic triangle is and which rules apply regardless of the investment, before we look at the exact investment options.
The magic triangle of investment
The magic triangle of investment is a model that deals with the objectives of asset classes and is made up of three different components. Every possible investment can be described in terms of these three components: security, liquidity and profitability.
- It should be noted that this is a model that describes the fundamental objectives of investors
- Each of the three components mentioned is about a goal
- However, it is impossible to find a system that can fulfil all three objectives at the same time
- Investors need to prioritise and can divide investors into these components to get a better overview
Security describes how risky the respective investment is. Different asset classes have different levels of risk. If you want to invest, it is always important to consider the possible risks in advance and find out whether you are a safety-oriented investor or are prepared to take risks.
Liquidity is often referred to as availability. It describes how quickly you can access a financial investment. For example, if you have taken out a long-term building society savings contract, you cannot simply withdraw the assets. If you have set up a call money account, this ensures a high level of liquidity or availability.
Profitability can be used to estimate how high the potential returns and profits are that you can achieve with the respective investment. This aspect is often related to the time you have available. The longer you have invested in an asset class, the more you can benefit from the compound interest effect.
As already mentioned, it is not possible for investors to fully fulfil all three objectives with just one asset class. For example, shares are associated with risks, but offer the opportunity for high profitability, for example to make private provisions. Call money accounts offer very high availability and security, but hardly any profitability.
Invest money properly with these 8 tips
Below we provide you with some valuable tips on the basics of investing. If you want to invest assets, you should familiarise yourself with these topics in advance and find out what suits you as an investor.
1st tip: What risk type am I?
Everyone deals with risk differently, often with different characters. Some people get nervous when investing in asset classes with higher risks, feel uncomfortable and often look at their own portfolio. Others enjoy it and consciously take risks.
Personal circumstances also depend on how risks are handled. A young student about to start working life can take more risks than an older person who wants to top up their own pension with investments.
You should only take risks that you can tolerate without acting emotionally or feeling uncomfortable. Therefore, find out what type of risk-taker you are and ask yourself the following questions, for example:
- How much loss could I bear from a financial point of view?
- Do I get nervous or panicky when my own portfolio makes temporary losses?
- What is fundamentally more important to me: security or returns?
2nd tip: Pay off debts
Before you start investing, certain debts should be paid off. If you have signed a building contract that will run for years to come, it doesn’t make sense to wait. On the other hand, if you have credit card debt with high interest rates, for example, these should be paid off in advance.
3rd tip: Set individual goals and create a schedule
The realisation of goals works better when concrete measures have been set and ways of achieving these goals have been defined. Time also plays an important role.
Think about what you want to invest in and what you plan to do with these assets. Do you want to build up assets for your children? Do you want to save for a house? Or would you like to make private provisions in addition to your state pension to ensure a carefree life in old age?
Your goals play a decisive role in your choice of asset classes. If you only want to save for your next holiday, it is not worth investing in ETFs, as this investment is geared towards the long term. If, on the other hand, you want to top up your pension, you will hardly get any closer to your goal with an overnight money account.
Before you start looking at asset classes, you should ask yourself these questions:
- Why do I want to invest?
- What do I plan to do with these assets in the future?
- How long can I leave the assets in the asset class?
4th tip: Create a budget book
Once you have taken tip number 3 into account and defined your own goals, it is advisable to write them down so that you always have some kind of overview. It also makes sense to keep a budget book if you want to invest properly.
You can use a budget book to record and compare your income and expenditure. In the long term, you can keep a written record of your financial situation and check where your money is going. This makes it easier to identify unnecessary money wasters and find potential savings. You could use this money to increase the amount you invest and achieve even higher returns in the long term.
5th tip: Diversify your investments
Diversification is a useful and important principle when investing. You can use this tool to divide up your risks. The idea is to invest in different assets in order to reduce the overall risk of your portfolio.
A good example is investing in shares. If you only buy one share, the risk is comparatively high. If the company goes bankrupt, you lose your money. However, if you spread your risk and invest in a large number of shares, you can spread your risk across several securities, which reduces the overall risk.
You can diversify at different levels:
- Invest in different countries: Global crises can occur, such as a natural disaster that only affects one particular country. If you invest your money internationally, you are better protected against such risks
- Invest your assets in different companies
- Invest in different asset classes to build up a balanced portfolio. In this way, you can make part of your money particularly liquid, for example with an overnight money account, and invest another part profitably
- Some crises only affect a specific industry, which is why you should also invest in different sectors
Good to know:
Diversification is an excellent way to achieve greater security in your own portfolio. In this way, you can invest in risky investments such as shares and still pay attention to security.
6th tip: Take costs into account
Once you have decided on an asset class, it’s time to compare the costs. Depending on the investment, different costs may apply, such as transaction fees when buying a share. Ongoing fees also play a special role, such as when buying fund units. There can often be hidden costs here.
Examples would be:
- custody fees
- Performance fees
- Issue premium
You should also check what costs are incurred at different banks. A call money account or fixed-term deposit account should be free of charge, but costs may be incurred depending on the bank. Even small costs will add up over time and can reduce your return in this way. When choosing your security, also pay attention to the fees and keep them as low as possible.
7th tip: Take taxes and inflation into account
If you want to draw up a precise plan and calculate, for example, how high a possible pension gap is and how much you should save yourself, it is important to take inflation and taxes into account.
Inflation describes purchasing power and can devalue your assets if you invest in asset classes with very low returns over the long term. Even if you invest money, you should take future price increases into account in order to obtain realistic sums. Average inflation is around 2 per cent a year.
For tax purposes, you must pay capital gains tax, the solidarity surcharge and, if applicable, church tax. Capital gains tax is payable at a rate of 25 per cent.
8th tip: Bring time!
The earlier you start investing, the more time your assets have to work for you and generate returns. If you invest so that you can achieve long-term goals, you can benefit from the so-called compound interest effect:
- Interest that you have earned is reinvested in the asset class
- The interest earned can now also generate further returns, which means that the basic sum becomes larger and larger
A long investment horizon brings further advantages in addition to the chance of an attractive return. If you invest your assets for longer, the risks of your investment are reduced. This is particularly advantageous for risky asset classes such as shares or ETFs.
Which investment is right for me?
Now that you’ve given some thought to your investment, you may be asking yourself ‘what to invest in?’. Below we give you an overview of some asset classes. However, for reasons of space, this overview is not complete. We try to present as many different and common investments as possible, covering various advantages and disadvantages.
Shares and ETFs
By buying a share, you can become a co-owner of a company. Investors specifically select companies in order to profit from the performance of a group. They want to buy a share as cheaply as possible and sell it as expensively as possible at a later date.
A dividend strategy is also popular with equity investors. Some companies distribute part of their profits to their shareholders in the form of dividends. There are certain companies that are known for their high dividend payments.
For example, you can make a one-off payment or set up a savings plan for shares, allowing you to make regular contributions and save for your future and financial goals. This is particularly practical for investors who are currently unable to invest large sums.
Shares offer an attractive opportunity for high returns in some cases, but are also associated with risks. For example, investing a large proportion of your assets in just one company involves a high level of risk. It could happen that this company goes bankrupt and you lose your assets.
This risk can be significantly reduced through sufficient diversification, for example by investing in many different companies from different countries and sectors. ETFs or exchange-traded funds offer another very simple way of diversification.
ETFs are also among the investments with high returns. This is a fund that is based on an index. An ETF on the DAX invests in the 40 largest German companies:
- With the help of an ETF, you can easily invest in numerous companies and diversify sufficiently
- So-called global ETFs invest in hundreds to thousands of companies, which greatly reduces risks
- With such funds, you can invest in shares, bonds or commodities
ETF selection: Sustainability and thematic focus
There is a large selection of ETFs. For example, if you are interested in sustainable investing, you will find a range of global ETFs that invest in companies that are committed to doing business sustainably. Thematic ETFs, on the other hand, focus on specific sectors, which reduces diversification.
Basically, this asset class is an easy-to-understand and favourable option with the chance of attractive ETF returns. ETFs are suitable for long-term goals, for example you can invest money for children or save for retirement.
Call money account
One of the most widely used asset classes is the call money account. Do you want to go shopping and withdraw money quickly? A call money account is perfect for such plans, as you have immediate access to your assets. It is an asset class that offers you very high liquidity.
The investment risks are also very low here. In addition, there is a deposit guarantee of 100,000 euros per investor. In line with the magic triangle of investment, the potential return is very low with a very high level of security and liquidity.
This type of investment is therefore not suitable for your long-term goals, but for short-term storage of the part of your money that is to be used for purchases, for example.
Another option is to store your savings in a call money account or short-term fixed-term deposit:
- A nest egg provides a kind of financial cushion for unforeseen expenses, such as a car repair or a new washing machine
- It is generally advisable to save an emergency fund of 2 to 3 net salaries before starting to invest
Fixed-term deposit account
This type of account allows you to invest a certain amount over a fixed term and at a pre-agreed interest rate. This means that the return is higher than with an overnight money account, but the liquidity is lower due to the fixed term.
The interest rates offered are also higher for longer terms. There is also a statutory deposit guarantee of 100,000 euros per investor, which makes it a safe investment option. A detailed comparison of fixed-term deposit accounts is worthwhile in order to secure the best offer, i.e. the highest interest rates.
real estate
There are numerous different options for profiting from the property market. One option is to finance your own home and save on rental payments. Another option is to rent out your own house or flat and benefit from rental payments.
- However, there are also options for investors who are currently unable to finance a property
- Property funds are an option as they finance different types of property projects.
- Examples include hotels, shopping centres and retirement homes. Investors benefit from the increase in the value of the property or from rental income
P2P loans
P2P loans offer another opportunity for attractive returns. These are loans that are granted by a private individual to another private individual without the need for a bank.
As an investor, you can support private projects and benefit from varying returns. The loans are categorised by credit rating, depending on how secure the loan is. In this way, you can individualise your own portfolio and tailor it to your own risk profile.
You can decide for yourself whether you prefer to invest in secure loans or opt for higher returns and increased risk. In principle, the following also applies to this investment: risks can be reduced with sufficient diversification!
Conclusion: Investing money correctly – here’s how!
If you want to start investing money, the whole subject of finance can seem complex and confusing. After all, there are numerous asset classes and different opinions. However, if you do enough research into yourself, your goals and the various advantages and disadvantages, you have a good chance of achieving attractive returns and your financial goals.
Find out what type of risk you are and whether you favour returns or security. Start keeping a budget book. If you decide to invest money, make sure you keep costs low and diversify sufficiently to reduce possible risks.
The magic triangle of investment can also help you to assess asset classes. With this information, you can compare whether the possible advantages and disadvantages match your goals and whether the investment is suitable for you or not. Find out more about or ‘top flop shares’ here!
FAQ – Frequently asked questions
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.
In 2025, P2P lending once again delivered excellent results and provided investors with strong, double-digit returns. The market continues to grow and more and more P2P platforms are being added – but which providers will still be worthwhile in 2025? We have compared the best platforms in Europe for you and present our top 10 […]
A global portfolio of ETFs with a 70-30 ratio is regarded as the absolute classic among investment strategies. But a lot has changed on the financial markets since then: Is the 70 30 portfolio still up to date, what are the opportunities and risks, and are there better alternatives? You’ll find the answers in this […]