Learn The Game of Risks & Returns

At the moment, all the investment strategies, all the financial products, they are connected with the risk. If you are a young investor and you would like to start invest your money, there is no products which are not connected with the risk. And the investment strategies, which covers, for example stocks, bonds, or real estate, they constitute a different part of the risk. Because bonds are more stable than stocks, you can decide how much risk you would like to take with your investment. A higher proportion of shares mean a higher risk of loss, but also the higher return on your investment. You can create as many strategies as you like. So for example, for one goal, you can go for a higher portion of shares, which’s mean a higher portion of risk, but then this strategy could be a little bit long term. If you are a little bit risk-averse person, you should go a little bit conservative products like, for example, bonds. But anyway, for each of your goals you can have a different strategy and a different risk profile. This give you, of course, the opportunity to spread the risk of your total investment, and that’s the idea behind it: don’t put all eggs in one basket, but you should diversify your portfolio in a different asset class. The goal of diversification is to distribute exposure within a portfolio and introduce lots of accounts. Spreading money around in itself can be very helpful, and of course reducing risk. Your portfolio should be diversified, for example, by equity style; value versus growth or geographically; more assets class, so stocks and bonds in portfolio, which I mentioned before. Stocks and bonds also allow you to measure your risk appetite.

It’s not true that women are risk-averse. Women are more risk-aware. And women investors are less concerned with their recent investment and their return on their portfolio. What they really care, it’s about a specific amount that they want to put in place work for them in the long term. Women are actually literally responsible for managing their family-day of finance. Do you know that more than 85% of women are already CFO of their household? So the ability that women have not to react or panic or beat the market is one of the reasons why portfolios of women generate higher returns than those of men, because men are more impulsive in terms of decision making. They switch more often than women their financial advisor because the focus for them is on the really high return; and the focus for women it’s more on the long-term investment portfolio. It’s about the timeline and it’s about setting your goal. For women, I think, it’s more important to understand what we are doing actually with our finances, and if we feel really confident about our investment decisions. What we also noticed with FinMarie is that more than 85% of women want to invest in the organization that promotes for example, social-being, so the sustainable investments. Men, on the other hand, they focus more on how much money they can make based on their investment. So that’s mean, the reality is not that women are less interested in investment, but rather the investing industry is not set up to serve women.

At the moment, if you buy a single ETF it’s between 0.17% to 0.65%. Depends on the different online banks, online brokers, or even offline banks like Sparkasse. The biggest differentiation is actually transaction costs and fees. As a private investor you should look into this very carefully because a lot of online brokers, they are not very transparent in terms of fee. We, as FinMarie, we are regulated for the financial authority. We have a special financial licence for that. You always know exactly how much you are paying. If you decide to invest in an active-managed fund, for example, you should know exactly how much I will pay for that. What are the initial costs? What are the monthly costs? Are there any additional costs on top if I decide to actually close this fund? A lot of private investors should be very careful, especially with not very well known offers which are on the market.