To someone without prior experience, the world of personal investment can appear complex and confusing. With a barrage of terminology and numbers that are difficult to understand, it is often hard for people to enter into the world of investing. Even Bryan Ferrari, an investment advisor and banker at the state savings bank Spuerkeess admitted, “It is a jungle out there, it’s quite difficult to see straight.” In an effort to help beginners better understand this so-called jungle of financial investment, Delano sat down with Ferrari to discuss how he would advise someone beginning personal investing.
Ferrari was eager to talk about financial literacy and clearly showed a great desire to help newcomers enter the personal investment space. To him, people often become too reliant on unsustainable pension schemes when in reality it is in their best financial long-term interest to build up independent wealth through personal investment.
No one is perfect and... you have to learn on your own mostly.
Ferrari first advised that if one is “completely lost” with respect to investment, they should look to their bank and use the banking app they provide as a starting point. There, a banker will help the investor establish a risk profile that will “determine the best allocation between equities and bonds” for the person’s investments going forward. According to Ferrari, this risk profile is extremely important as it allows the bank to understand what the goals are for their client’s investments. An octogenarian will be looking for more wealth preservation, whereas a 25 year old investor will have more risk tolerance and will be looking for wealth appreciation. Following the establishment of a risk profile, the person’s savings will be placed in an investment fund, which will provide “a decent cover of global equities.”
However, for those looking to take more individual control of their finances and venture into personal investment, Ferrari suggested searching the internet for different brokers and investment strategies and opportunities. Ferrari noted that the investor will almost certainly then run into exchange-traded funds, or ETFs. ETFs pool together investment securities and hold multiple assets rather than only one and can easily be bought and sold online. Large stock indexes like the MSCI World group these ETFs together and “make it pretty easy for the investors to gain access to a broad basket.” Ferrari stated that the best way to enter into ETF investing and trading is to learn by doing. “No one is perfect and... you have to learn on your own mostly.”
Dollar cost averaging
After finding what funds you want to invest in, Ferrari said that, in his view, the best investment strategy for beginners is to engage in “dollar cost averaging”, or DCAing. Essentially, DCAing is a strategy that uses consistent investment over an extended period of time to reduce the volatility of purchase price. Ferrari noted that frequently buying an asset at a fixed price can potentially lower the average cost per share of the investment, making it more financially prudent over the long term.
“With DCAs, often when you’re a beginner, you think you can time the market, but nobody can, even us professionals,” Ferrari said. “So the best way to not time the market is by not putting all your eggs at once in the basket but doing it one after the other. If you have a down month, it’s fine; if you have an up month, it’s definitely good, but in the long run, markets tend to go up [as will your investment].” In short, as Ferrari put it, “There are no mysteries to investing in the long term. The easiest way is doing it regularly.”
In conclusion, though the world of investing may appear confusing, there are ways to make it make sense. Establishing a risk profile, engaging in recurring investments through strategies like DCAing and investing through ETFs can help simplify an otherwise very complex domain.
An alternate version of this article first appeared in the .