We can rely less and less on the legal pension. In times of high inflation and continued low interest rates, there is no way around shares to provide for old age or to save reserves in the long term.
Nevertheless, only very few Germans invest in the stock market. Aversion to risk and fear of losses are two of the most important reasons for the general reluctance to invest. Also, many worry about not knowing enough about stocks. Maybe you will find yourself in this description to some extent.
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The following two stock tips dispel these concerns – and thus show you a clear path how you can increase your wealth in the stock market without much knowledge and with little risk.
ETFs reduce risk
Admittedly: Investing in individual stocks holds high profit opportunities, but it can also be scary. Netflix stock (WKN: 552484), for example, hit a record high as recently as the fall of 2021 and is now down 73% (as of 15. July 2022).
But you can avoid this risk as easy as pie by investing in ETFs. ETF stands for Exchange Traded Fund – i.e. an equity fund that is traded on the stock exchange. ETFs are neither expensive nor risky, but very safe and straightforward compared to individual stocks. In an MSCI World ETF, which has over 1.500 different stock prices from around the world, Netflix stock accounts for less than a quarter of a percent of the price movement.
It's a way to protect yourself from the risks of individual stocks without sacrificing the long-term return opportunities of the stock market.
Invest in stocks for the long term
Long Term Income Opportunities? Yes, that's right. Although in the short term it can seem like the stock market is always going up and down, in the long term it's mainly going in one direction: up.
It has nothing to do with a stock bubble, it has to do with companies growing profits over the long term. The MSCI World just mentioned rose by an average of 7.87% per year over the past 35 years.
True, it doesn't do so every year. But if you invest in stocks for the long term, you can earn this phenomenal return without worrying about short-term fluctuations. Even better: If you save fixed amounts each month, you can even profit from the fluctuations.
The best time to invest is: now!
The two stock tips above not only lower your risk and protect you from losses. No, they also cut down on the amount of work and knowledge you need to invest in stocks.
That takes three of the biggest excuses out of the way. To benefit as much as possible from the compound interest effect, you should not wait any longer now. The earlier you start investing in stocks, the better.
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Christoph Gossel does not own any of the mentioned shares. The Motley Fool owns and recommends Netflix.
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