During the three years in which Grégory Guilmin was doing his PhD thesis in finance, he lost about 60% of his savings in the stock market. “Which is why the last part of my thesis was about portfolio optimisation and how to invest in the stock market,” he says good-naturedly. But the loss helped him understand the emotional element to investing; and now, ten years later, he is working full time as an author and financial educator, helping non-experts learn how understand money and--more specifically--how to invest it.

So, how should we invest it?

The game plan

For first-timers, Guilmin suggests asking yourselves three basic questions.

Why do you want to invest? This will determine everything that comes after. Maybe you want to retire early, maybe you want to take a year off, maybe you want to sail around the world.

What is your security cushion? This is an assessment of your financial status, i.e. how much you earn, how much you spend, how much you have saved up already. For Guilmin, your cushion is secure if you’ve got, in the bank, between six months’ worth of expenses and twelve months’ worth of salary. For example, if you make €3,000 a month and spend €2,000 a month, your security cushion should be between €12,000 and €36,000. The security cushion is not to be touched, but you might have something left over after counting it. And with that number you can decide how much to invest per month. Per month? “Compound interest is very important,” says Guilmin, noting that it’s better to invest €100 each month than to wait ten months and invest €1,000. “It’s like doing sports. If you do sports for two weeks and then nothing for six months… it’s not good for your health. For your financial health it’s the same.”

How should I invest? You can invest alone or you can employ a private banker to take care of it for you. The pros and cons are pretty self-explanatory: a banker brings expertise and is somebody onto whom you can shovel some of the emotional stakes (if it all goes wrong, you can at least blame the banker); but bankers also take fees and, to at least some extent, have control over where your money is going.

But I can’t do it alone

Wrong! You can. That, anyway, is Guilmin’s view. Granted, he makes his living teaching people how to invest in the stock market by themselves, but given the abundance of self-help books and how-to websites (and articles like this one), he’s probably right. It can’t be rocket science. “It’s not 50 hours, it’s not 100 hours,” he says, describing how long it takes to learn the tools you need. “It’s two hours a week for four, five weeks. That’s sufficient to give you very good knowledge so you can start investing.”

Still, circumstances can complicate the question of whether to jump in bed with a banker or not. First off, how much money are we talking about? “Investing €1,000… everyone can do that,” says Guilmin. “But if it’s €100,000, or €1,000,000, you might feel a psychological pressure regarding the money. [In such cases] it could be better to have a banker invest it for you because it’s too much pressure.”

And secondly, how much are you willing to pay for convenience? A professional can take care of loose administrative ends and make the process smooth, true, but it will run you as much as 2%, “which is very, very expensive!” says Guilmin. That number comes from the average fees that investment bankers take, which is 1.96%.

Five questions to keep in your pocket

Let’s say you go with the banker after all. Guilmin wouldn’t have you arrive to the meeting unprepared: here are five questions to ask.

How do you make money? The fees may be here and they may be there: management fees, custody fees (the cost of keeping the financial instrument on your account), brokerage fees when you buy or sell. Some bankers take a performance fee as well.

Where do you put your own money? Passive investments or active? “A few weeks ago I received a message from a person working at a bank,” says Guilmin, “who told me that 100% of his own wealth is invested in passive ETFs… but he cannot give that option to his clients because of pressure from his manager regarding the cost.” According to Guilmin, banks make a lot more money off active investments.

How does your performance compare to an index? Say, the MSCI World? A good test is to see if the banker is able to beat the MSCI World index, which is made up of 1,400 companies in 23 developed countries and is thus a good indicator of the worldwide stock market.

When the market goes down, will my portfolio go even lower? Volatility is an important factor in the stock market. Things will inevitably turn downwards sometimes, but if your portfolio--at that moment--has low risk, then it’s OK. “But imagine you have a lower performance with a similar, or slightly higher, risk than the market… that’s not good for your money.”

If this bank goes bankrupt tomorrow, what happens to my money? Are you going to lose everything? It’s just good to know.

At the bank

Well, let’s bite the bullet and go to the bank. Why not hear what they have to say? Here is some general advice for first-timers from Daniel Biever, head of the investment desk at Raiffeisen.

Diversification is crucial. “It helps reduce risk by spreading investments across different asset classes (stocks, bonds, real estate, etc.) and regions.”

Respect your investor profile. “Assess your risk appetite and sustainability preferences before investing.”

Invest in what you understand. “Always make sure you fully grasp the features and risks of an investment before committing your money.”

Investing is for the medium- to long-term. “The market fluctuates in the short term, but, historically, staying invested over time leads to growth.”

Define your financial goals. “Are you investing for retirement, wealth growth or a specific project? Your goals will determine your strategy.”

Stay calm. “Don’t get discouraged after first bad experience. Investing is a long-term strategy.”

Seek professional advice. “A financial advisor can help tailor an investment plan that fits your profile and objectives.”

Strategy talk

Earlier, Guilmin weighed in briefly on the question of active versus passive investments. First, though, what are they exactly?

Passive investing is when you invest in diversified funds that track a market index. “There’s no need to pick individual stocks,” explains Biever. “Your investment follows the overall market.” The advantages are that the fees are much lower--typically 0.2%-0.4% annually versus 1.96% for traditional funds, Guilmin points out--and that it’s just easier overall, i.e. less of a time commitment for you.

But, Biever says, you also don’t have a ton of flexibility with passive investing and you won’t be able to outperform the index.

Active investing, on the other hand, is higher risk and higher reward. “[If] you want to be more involved [and] go for conviction investing, you need to do active investing,” says Biever. “It offers you an opportunity for higher returns and more flexibility to react to market trends.”

“Nevertheless,” he adds, “this requires time, knowledge and research and is related to higher fees.”

The Raiffeisen expert breaks it down with the following advice: “If you prefer a simple, long-term approach, passive investing (index funds or ETFs) is often the best choice. If you enjoy market research and are comfortable with risk, you might explore active investing.”

“Many investors use a mix of both,” he adds, “combining passive ETFs for stability and some active investments for potential growth.”

Let’s launch some cash

All right, we’ve made up our mind: we’re going to invest. Here’s what Biever says to do with €5k, €10k, €50k and €100k.

€5,000. “Clearly, this is the kind of amount you’d want to keep in cash for unexpected situations. Therefore, you should consider keeping this sum in your savings account.”

€10,000. “Supposing you can keep the €10,000 untouched for an extended period, and considering your risk profile, you may consider starting a R-PlanInvest savings plan. This solution allows you to invest smaller amounts regularly (monthly, quarterly or annually, starting from as little as €50) into an investment fund of your choice. This approach is especially suited for riskier funds, as the regular investment schedule helps smooth out market fluctuations over time, reducing the impact of short-term volatility.”

€50,000. “You can invest €50,000, but the choice of investment always depends on your risk profile and return expectations. An aggressive or dynamic investor would typically opt for a globally diversified equity fund, which could also be an ETF. For a balanced investor, a flexible or mixed fund might be the appropriate solution, as the fund manager adjusts the investment strategy depending on market conditions. Defensive investors can now find alternatives such as fixed-term bond funds or aggregate bond ETFs, which offer more stability compared to classic bond funds.”

€100,000. “For €100,000, you have the opportunity to build a diversified portfolio in collaboration with one of our advisors, tailored specifically to your risk profile and investment goals. Depending on your preferences, your advisor will recommend a mix of asset classes, such as equity funds, bonds and potentially structured products. If you’re an aggressive or dynamic investor, you might lean towards a globally diversified equity fund or ETFs to maximise growth potential, keeping in mind the higher volatility. A balanced investor might prefer a combination of flexible or mixed funds, which offer more stability while still capturing growth opportunities. In contrast, defensive investors can focus on fixed-term bond funds or aggregate bond ETFs, which provide lower risk but more predictable returns.”

This article was written for the to the  of Paperjam magazine, published on 26 February 2025. The content of the magazine is produced exclusively for the magazine. It is published on the website as a contribution to the complete Paperjam archive. .

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