Even the birds on the branch know that money, especially during inflation, loses value while it ‘sits’ in the account. And since interest rates on savings have not been appealing in recent years, many find the decision to invest part of their money in various types of assets a logical step. Whether it is stocks, real estate, art, gold, or cryptocurrencies, returns on investments can indeed be lucrative and bolster household budgets, but before entering the world of investing, it is important to educate oneself and set investment goals – what do we want to achieve with this? And last but not least, one must be aware of the risks.
Returns Greater than Real Estate Investments
Sandra Ferenčak, author of the blog MyTetka on personal finance and investing, says that investing is just one aspect of life for her, albeit an important one. A large number of people seek quick profits, she adds, often getting burned and equating ‘investing with gambling’.
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—– I believe it is extremely important to first invest some time and money in education about it, and then to apply what you have learned with discipline, regardless of how small the amounts you can afford to invest at the beginning – says Ferenčak, who primarily invests in global ETFs, or funds traded on the stock exchange.
– This is a passive form of investing in funds that replicate a certain market index, such as the S&P 500, with extremely low management fees and covering a wide range of assets that can be invested in – stocks, bonds, precious metals, real estate, etc. I have been adhering to a similar strategy for many years, maintaining a certain ratio of equity and bond funds and I hardly change it since short-term fluctuations in market value do not affect me as I invest exclusively for the long term. The investment strategy is aligned with my age, the structure of my total assets, and my risk tolerance. Currently, it consists of about 75 percent equity ETFs (mostly the US S&P 500 index), 20 percent bonds, and five percent ETFs that invest in gold – explains Ferenčak.
She also notes that the annual return of the S&P 500 index over the last 20 years is around 10 to 11 percent, ‘far above anything we could earn by investing in real estate, especially by keeping money in the bank’.
– The bond portion carries lower yields, but its role is more in stabilizing the portfolio than in actual earnings, although that is not negligible at the moment due to rising interest rates – adds Ferenčak, satisfied with her current investment strategy, which she sees no need to change.
The only investment she is currently considering is, she says, one in health. A similar view on investing is held by Magda Milas, president of the Alice in Blockchains association for the inclusion of women in cryptocurrency and blockchain technologies. When it comes to investing for indirect financial benefits, she invests the most in her own education and acquiring new skills.
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—– One of the more concrete investments of that type I made in 2014 when I enrolled in a pilot school with the goal of obtaining a private pilot license. This education cost me around 10 thousand euros at the time. It is now even more expensive. That investment changed my life, my way of thinking, and gave me skills that I apply in my everyday life. For me, it is invaluable, and the investment has returned to me in countless positive forms – from decision-making, focus, prioritizing, to dealing with fears – says Milas.
Smart with Cryptocurrencies
Regarding investments aimed at direct financial benefits, Milas describes herself as a traditional type of investor and predominantly invests in cryptocurrencies.
– Most of my portfolio is in Bitcoin and Ether as long-term investments. The rest is in some smaller blockchain projects that I consider promising. That is something I ‘keep aside for one day’ and for ‘God forbid’ – adds Milas, who has recently started investing in the Croatian art scene, specifically in the works of young academic painters Mia Matijević Akrap (Protagonist) and Luisa Pascu (Fridge).
Milas also emphasizes the importance of education, especially when investing in cryptocurrencies, as these are high-risk investments where numerous malpractices, speculation, and fraud are possible. It is a new area that is incomprehensible to the average person, which can also create room for manipulation, notes Milas. On the other hand, returns on cryptocurrency investments cannot be predicted at all.
– Cryptocurrencies are known to be extremely volatile, and we witnessed unprecedented growth during 2021. So, if you bought Bitcoin in March 2020 (COVID) at an approximate price of five thousand dollars, in November 2021 you could sell it for 69 thousand dollars. Most people will naturally start to show interest in buying only when the price reaches an all time high. And that is wrong because you should never buy when it is at its highest value. If we talk about this specific case, anyone who bought Bitcoin while there was a general depression and global epidemic could have earned 13 times more than invested in just a year and a half. But that carried enormous risks along with the additional fact that no one can predict the rise or fall of a particular cryptocurrency – concludes Milas.
