How to choose the ideal investment

The choice of the ideal investment represents a real challenge in times of low to hardly available interest rates.

Those who rely on the tried and tested options such as fixed-term deposits, overnight money or a life insurance policy only have a guarantee against losses. The reason lies in the fact that the granted interest rate lies with maximally one per cent per year, the inflation rate and thus the inflation however ranks between one and a half and two per cent.

From a financial point of view, it is almost more clever to spend the money in advance and, for example, invest in the modernisation of your own four walls or necessary purchases.

However, there are also alternatives to investing money that are much more worthwhile, such as maritime digital investments, equities or even ETF and crowd investing, to name but a few.

Even crypto currencies and tangible assets are repeatedly listed in the lists of possible financial investments.

Is a financial investment always necessary?

Some will wonder why an investment is necessary at all.

The reason lies in the often inadequate statutory pension. In order to balance the possible difference to the actual financial need in old age, a financial investment is in demand, which can take place also in form of a private age precaution.

Which kind of the investment is thereby the correct, can be judged hardly overall. As a rule, one should focus on a mix and also give innovative products a chance.

Which investment makes sense?

An investment that was considered sensible even before the beginning of the 2008 financial crisis is no longer recommended.

The reason lies in the falling interest rate level, which was still 4.25 percent in 2008 and has been continuously reduced to 0.00 percent since 2016. Experts agree that an interest rate hike is not to be expected in the coming years, so that fixed investors will continue to have to live in poverty.

The result is that almost no interest is paid on fixed-term deposits, overnight money or money on the savings book and life insurance policies or private pension insurance policies based on fixed-term deposits have lost their appeal. It is no longer worth it.

On the other hand, it makes sense to invest money that contains a well-calculated risk and is based on tangible assets. This includes equities as well as equity funds and ETFs, but also real estate and digital maritime investments or crowdinvesting.

The list could still be continued, because especially in times of the Internet exciting possibilities of the investment of funds arise, which function completely differently than the earlier course to the bank advisor.

How does an investment work today?

The fact that times have changed can also be seen in today’s means of obtaining information and closing a financial investment.

In the past, it was customary for the bank employee to provide the impetus locally and to be selected from a very limited number of products. Theoretically, it was of course possible to invest on the stock exchange or buy fund units ten or 20 years ago, but these were almost niche products.

What was offered was what enabled the bank to make profits and the consultant to earn commissions, which also worked with high guaranteed interest rates and created win-win situations.

Today, however, the safe products have largely disappeared from the market and the banks as the sole authority for financial investments have also lost importance.

In the 20s of the 21st century, anyone who wants to find out about finances and an investment uses the Internet. Here you will find an abundance of informative websites and those who keep an overview will quickly gain a comprehensive picture of their possibilities.

Of course, classic products such as private pension insurance or life insurance are still offered today, but these increasingly contain variable shares from equity funds or shares, which exclude the previous security and guarantees.

Who would like to invest however in shares or funds, this can do also directly and without the detour of a (often expensive) insurance policy.

Equities and ETFs as financial investments

In fact, shares have performed enormously well in recent decades and have for many years been regarded as the most profitable form of investment.

Ideally, shares yield annual dividends and price gains are also substantial. Of course, the success stories are presented in media reports above all, because a rise in the German share index (DAX) does not necessarily mean that all stocks have risen equally.

In other words, profits may have been achieved by and large, but there are both winners and losers on the stock market. Those who bet on the wrong horse may also have made losses in this area, so that this investment must be regarded as risky.

The risks are somewhat mitigated by betting on equity funds. We are talking here about a “basket” containing different stocks, which mostly represent sectors or countries or a stock index such as the DAX or Dow Jones. Also here it concerned in the comparison with time deposits a good and meaningful investment with solid net yields.

However, if you decide to invest in equity funds, you should immediately look out for ETFs. The abbreviation stands for Exchange Traded Funds and thus equity funds that are directly traded and therefore require virtually no front-end load. The investment is therefore simply cheaper.

Crowdinvesting as a financial offering

Crowdinvesting is also an opportunity to invest in companies or specific projects.

The advantage is that investors do not have to pay any commissions and even small sums can flow into a long-term investment. An example of this is digital maritime investments.

In concrete terms, this means that by granting loans, investments are made in ships and the financial investment promises a return of between six and seven percent. By ensuring maximum transparency, risks can be well controlled and monitored.

The "best investment"

The “best investment” does not exist and will never exist. The list of possible investments could also be extended to include real estate, crypto currencies or material assets such as vintage cars or art, and gold and silver are also mentioned again and again.

Anything is possible and promises different profits. It is relevant that a risk spreading is operated and one says goodbye to the safety thinking of earlier years.

A financial investment that yields returns without risk simply does not exist at present and will probably not exist in the near future.