When considering planning for your financial future, it is critical to understand the crucial role that investments play. This guide aims to delve into the universe of investments for beginners, simplifying complex concepts and demonstrating that any individual, regardless of their financial situation, can start their investment journey in a safe and efficient way.

What is investment?

Investing is a financial strategy in which a person allocates resources (usually cash) into financial assets or instruments in order to achieve future financial success. Investing involves purchasing assets with the hope that they will increase in value or generate cash flows over time.

There are many different types of investments, and each type has its own characteristics and level of risk. The most common investment assets include:

• Fixed income securities: fixed income securities cover investments such as government bonds, bank deposit certificates (CDBs) and private bonds. They work when you lend money to an institution or government and, in return, receive interest on the amount you borrow.
• Variable Income: This type of investment includes stocks and mutual funds. The return on equity investments can vary widely and be highly volatile.
•  Real Estate: Investing in real estate involves purchasing real estate, such as a house, apartment or commercial property, to increase in value over time or to generate rental income.
• Mutual funds: Mutual funds pool money from multiple investors and invest it in a diversified portfolio of assets, including stocks, bonds and real estate.
• Entrepreneurship: Investing in your own business is a type of investment that has the potential for significant financial returns, but requires significant risk and effort.

Basic concepts for beginners

Liquidity

Risk

Risk means the chance of losing part or even all of your investment. All investments carry a certain degree of risk. There are different types, such as market risk (changes in asset prices), credit risk (the possibility of lack of payment by the security issuer) and liquidity risk (difficulty in selling investments).

It is essential to understand the level of risk present in each investment and assess your own willingness to deal with that risk. More cautious investors tend to opt for investments with lower risk, while more daring ones may be willing to take greater risks in search of higher returns.

Financial feedback

Return refers to the profit or loss on an investment. It is often expressed as a percentage of the initial investment cost. Income can be positive, meaning you make money, or negative, meaning you lose money.

In general, investors expect positive returns, with returns varying depending on the type of investment. Fixed income investments, like bonds, generally have lower returns but lower risks. Variable income investments, such as shares, can offer high returns, but are subject to greater volatility and risk.

Diversification

Diversification is a strategy of investing in a variety of assets to reduce risk. By diversifying your investments across different asset classes, sectors and geographies, you can reduce the negative impact of a single investment’s poor performance. Diversification is an effective way to balance risk and return in your portfolio. For example, instead of investing all your money in one company’s stocks, you can diversify your portfolio by investing in stocks, bonds, real estate, and other assets.

The link between risk and financial return

There is a direct relationship between risk and return on investment. In general, the greater the risk, the greater the potential return and vice versa. This means that high-risk investments have the potential to provide high returns, but they can also lead to losses.

Low-risk investments, on the other hand, offer moderate returns but are less likely to incur significant losses. The choice between risk and return depends on your financial goals and risk tolerance. It is important to find a balance that suits your investment plans and your ability to withstand potential losses.

Best Investments for Beginners

The markets offer a variety of investment options for beginners and, contrary to popular belief, it’s not just about savings and the stock market. That’s why I’ve already said that there is no “best investment for beginners”, but there are some great recommendations that deserve personal evaluation.

Explore three investment options for beginners:

1. Emergency reserve – Fixed Income

An emergency fund should always be your first investment. This is an amount that can cover living expenses in the event of an event such as unemployment.

Good emergency backup options that don’t require a lot of money to start are public bonds, CDBs with daily liquidity, while another option is to keep your money as “savings” and use a digital bank like Nubank. , PicPay and Sofisa Direto offer superior returns on your savings and allow you to exchange money quickly when you need it.

Even after saving some emergency reserves, many people continue to prefer fixed income options to increase their investments. It is a good choice for beginners as it does not involve many risks.

Some options are:

• CDBs – Bank Deposit Certificate;
• LCI – Real Estate Letter of Credit;
• LCA – Agribusiness Letter of Credit;
• Debentures;
• Fixed Income Investment Funds;
• LC – Bills of Exchange;
• CRI – Certificate of Real Estate Receivables;
• CRA – Agribusiness Receivables Certificate, among others.
  Once you gain more confidence in how things work, you can move on to investment number two.

Once you gain more confidence in how things work, you can move on to investment number two.

2. ETFs – Exchange Traded Funds

ETFs are made up of mutual funds that are traded on exchanges at very low fees, like stocks.

This type of investment is well known abroad, but has been gaining ground in Brazil. Some examples include BOVB11 – ETF BRA IBOV – IBOVESPA and EURP11 – TREND EUROPE – MSCI Europe.

The ones that tend to stand out and grow in value are cryptocurrency ETFs.

3. Real Estate Funds

Real estate funds are lower risk investments than shares. This is an investment in which money is invested through the purchase of shares in real estate funds, such as shopping centers, warehouses and offices in large cities. The investor then receives a portion of the profits from the rental or sale of this property. This is a way to earn monthly rent through investments. Nowadays, investing in real estate funds can be done easily, quickly and with little money. Some digital banks also offer this option.

Investment for beginners: how to start?

1. Define your goals

• Short-term: these are investments lasting up to one year, widely used for emergency reserves;
• Medium term: these are investments lasting 1 to 5 years;
• Long-term: these are investments with a term of more than five years, such as retirement.

Once you identify your goals, you’ll be one step closer to investing with confidence. It’s important to note that goals can change over time. However, to achieve your goals, you need to define them, as it is more difficult to achieve your dreams without them.

2. Know how much can be invested monthly

Before investing, you must be debt-free and able to pay your own bills. Once you have negotiated your debt, it will be easier to determine how much you can invest each month. Don’t invest the money left over at the end of the month. There may be nothing left.

3. Find out what your investor profile is

The investor profile is a way to understand which investments are ideal for you.

There are three profiles:

• Conservative: investors with low risk tolerance;
• Moderate: protect capital, but are willing to invest part of the money with some level of risk;
• Aggressive: they accept losing part of the return in some periods in exchange for obtaining more profit.

4. Open an account with a stock brokerage

Now that you understand your investor profile, it’s time to open an account with one of the best stock brokers. They play an important role in your investing journey and should help you along the way.

Is it possible to make investments with little money?

One of the biggest misconceptions about investing is that you need a lot of money to start investing. In general, it is better to invest a little early rather than waiting for the right time to invest a large amount of money. Tesouro Direto has options starting at $30. Another cheap fixed income option is CDBs, which can be invested for less than $100. When talking about investment, it is important to understand that time directly affects your capitalization yield. So the sooner you start, the better!

What matters is not the initial investment, but how you manage it. For example, you can invest a small amount every month, which is cheaper and more profitable than investing all at once.

5 mistakes to avoid when investing

In addition to taking one step at a time, it is important to learn from other people’s mistakes. Yes? Because we care about you, we’re sharing five investing mistakes for beginners. Check out:

• Not having saved to start investing;
• Thinking that the investment delivers an immediate return;
• Not having defined goals and redefining them over time;
• Not studying the subject frequently;
• Investing in something that is on the rise without a strategy.

Investing with limited resources may seem challenging, but it is completely doable. When starting with little money, the key is consistency and long-term focus. The important thing is to start, even with small amounts. Choose accessible investments, such as investment funds, fractional shares or even applications that allow you to invest with few resources. Remember, time is on your side when it comes to investments. As you learn and gain confidence, you can gradually increase your investments. The most important thing is to stay disciplined, keep learning, and adjust your strategy as needed. With determination and patience, even investing with little money, it is possible to follow a solid path towards financial growth.