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Create 10,000 Euros: The Ultimate Blueprint For Getting Started

Create 10,000 Euros: The Ultimate Blueprint For Getting Started

10000-euro-create-homemade-finance

A question that regularly ends up in my mailbox is:

I want to invest 10,000 euros. How can I go about it and what do I have to pay attention to?

For many, this amount seems to be something like the starting signal for an investment above the call money.

Often, people have saved him and now would like to take the first step to the stock market, but are not sure how they could proceed.

If you have found yourself in these lines, then this post is just right for you!

So I’ve come up with step-by-step instructions on how best to do this in my opinion and how I did it.

But beware: Since I do not just want to give you a nude list and then get up from the laptop, I have to go back and forth a little bit to explain some aspects or my point of view.

The result is that this post has over 2,500 words and it takes just under 15 minutes to read it.

If you are fresh on the stock market, these 15 minutes are certainly EXTREMELY well spent time, I guarantee you.

Not only for your question how you can invest your 10,000 euros, but basically for the rest of your life on the stock market.

So let’s go ahead.

content

  • Congratulations!
  • 1. Start
  • 2. The iron nest egg: How many reserves should one make?
  • 3. Define a purpose
  • 4. Set the time frame
  • 5. Determine our risk appetite
  • 6. Choose our investment vehicle
  • 7. Find the right ETF
  • Summary and checklist
  • Conclusion
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Congratulations!

You may find it odd to start a post, but I’d like to congratulate you on this.

Yes, that’s right.

You want to invest 10,000 euros and have apparently made the firm decision to take your financial future in self-determined from now on. With this you have made the first and probably most important step:

1. Start

An overwhelmingly large proportion of citizens never become really active when it comes to their own money. Many remain alienated for a lifetime and leave it in terms of investment in what the state pretends to them, so pension, Riester and a little welfare state.

It remains with many then too. This is a shame, because off the beaten track there are many more attractive ways to financially emancipate themselves.

However, this requires dealing with some financial knowledge and since many have no desire for it anymore. This is not only a pity, it is simply sad.

Because it does not take much know-how, but only the right thing to take care of your own money and not just let others decide what you deserve. That’s why Homemade Finance.

There is still a reason to wait for many:

No time, too risky, the stock market is too high, too boring, just Christmas, blablabla. This list can be continued endlessly.

But in my opinion, people are fooling themselves. My belief is:

The secret of winning is beginning.

Because fact is also:

There is never a perfect time to get started!

What may sound negative at first is very positive at second glance. Because if there is never the perfect time to get started, then you can not do much wrong. Point for us then.

2. The iron nest egg: How many reserves should one make?

One aspect that is often forgotten when starting on the stock market is that it creates a cash cushion.

What do I mean by that?

Before we just break loose, put on our 10,000 euros, only to realize after a year then that we would actually need the money to get a new washing machine or the like, we should first talk about the iron nest egg.

Life is full of imponderables. Who knows what your life will look like in the future and what challenges will still be on you.

If you are, you need to be able to overcome these financial bottlenecks without having to prematurely wind up your portfolio. Because that usually happens just when the stock market is just once again on the ground.

Short example: The next financial crisis is here and you have unfortunately lost your job. Until you find a new one, it can easily take a few months to land. If, in this situation, you do not have any reserves that you can access, but only your deposit, then you will need to (partially) resolve this out of necessity.

But guess what? It’s financial crisis. What do you think about the courses? Right, absolutely shitty. But since you have no choice, you have to bite into the bullet and make a heavy loss with your portfolio.

In summary, you are now unemployed, have made losses on the stock market and all because you did not have nest egg. Something like that.

  • It is ESSENTIAL that you build an iron nest egg. This allows you to bridge emerging liquidity shortages suddenly and you do not have to sell your portfolio early, which would be the only way to lose money on the stock market.

 

Here I tell more about the iron nest egg . In short: You should keep between 6-12 of your monthly expenses quickly available on the daily allowance. With it you can also bridge bad times (unemployment, illness, …) and sort them out before you attack again.

Here the principle again graphically represented: 

I know, you came here to learn how to invest 10,000 euros and now I tell you, you should park it again on the caked day money.

But I wanted to go to the stock market and start. Scam!

Room, made. Here is a suggestion:

If you still have not thought of a cushion for you, but you still want to immediately on the stock market, then put regardless of your investment horizon € 7,500 on a money market account, or leave them there.

With the other € 2,500 you go public and make the first step towards financial self-determination. Then promise me and you, but in the next few months regularly pour money into the container with the iron nest egg and that until you could bridge at least 12 months.

Deal?

3. Define a purpose

It is important that you stop for a moment and assign a purpose to your $ 10,000 you want to invest. Here are some suggestions:

 

10 ideas why you want to invest 10,000 euros

 

1. As a foundation for your financial freedom

2. Build a second income from capital

3. Equity (replacement) for a house

4. Hedging the children

5. Go again on Farewell World Tour at 80

6. Be less dependent on the state pension

7. Early retirement

8. Have more time to acquire knowledge

9. Invest in your future

10. For a flight into space

 

The possibilities are as endless and individual as you are.

Even if you have just landed here with the intention to invest your money just kind of neat, then I ask you anyway something to think about.

The reason is simply that going public is psychologically much easier if you have a specific goal in mind. Human nature is inadequate, so we should always trick ourselves a little if it threatens to get in our way.

So we set a non-abstract goal, with which we can continue to motivate ourselves in the next financial crisis . Everything is allowed, as long as it is not just the investment itself.

Investing should never be an end in itself.

4. Set the time frame

Now that you’ve determined the purpose of your investment, the next step is to determine your investment horizon. Depending on how old you are and what your purpose is, you will have more or less time to invest your € 10,000.

This is so important because we decide what time we spend on what time we spend.

Of course, it always depends on your personal situation, but in the following table I show you an overview of how I see it:

10000-euro-asset-comparative

Please note that I am not an investment adviser and this overview, like everything else on Homemade Finance, is simply my personal opinion and my view of things.

Of course, this also means that others may have a different opinion on the division or periods of time than I do. That’s ok, if you want to discuss it. The comments are open to you.

So, from the table we see:

The more time we have to achieve the purpose, the more risky, but also more profitable we can invest our 10,000 euros. Of course always set the case that you have already managed an iron nest egg aside.

5. Our risk appetite firmly sure n

Another aspect that influences the distribution of our small assets is personal risk tolerance.

This is a difficult point, as you can only really see them when you actually stand in the stock market. There are investors who do not even bicker when the markets and their depot rush 50% south.

Others, however, is already at 5% look down the sweat on the forehead. The problem is that you can not simulate this feeling when there is no real money at stake.

Of course, we can not invest 10,000 euros or go public if you need the money a) soon again and b) you have a problem with risk.

To a) we have already taken care of up there, b) helps unfortunately just jump into the cold water. Of course, the stock market also lubricates. So what? Fluctuation is good, fluctuation is risk and diversified risk is fair return. And that’s what it’s all about in the end, right?

Then let’s change our relationship with risk from now on, right here and now. It is not our enemy, it does not want us any harm. Risk does not feel joy when we are in the minus. It’s just there. It’s just there and part of life.

So let’s find out about it and learn to ignore our emotions when our deposit slip shows red numbers. Expected value and time work for us. We should never forget that in heavy trading hours.

In spite of your euphoria, start your stock market career with a smaller amount than you can trust yourself. Imagine the following question: What could I do without the next 20 years if things went stupid?

So, if we want to invest $ 10,000 then it can be a good rule of thumb to get to know our risk appetite a bit better. The final truth about ourselves, however, we will learn only when the stock market burns again and then actually our own potatoes are in the fire.

6. Choose our investment vehicle

This may sound like a stab, but in the end it means nothing other than:

What do we invest in and how do we invest in it?

Regarding the iron nest egg this is relatively easy, a savings account is part of the standard offer of each bank and the offers are not very different from each other. It also makes no sense to operate for 10,000 euros day money hopping .

The Finanzwesir has durchgexcelt this very beautiful: the effort does not pay off. Just look for a relatively tidy account and stick with it.

If we want to invest 10,000 euros, then the interest on the daily money anyway play a minor role. With overnight money it is only about inflation compensation and quick availability. Return is earned on stocks and bonds, not interest on the account.

For this reason, in my opinion, fixed term money, in my opinion, also does not matter, because it usually creates little more than the inflation compensation, but at the same time is illiquid. Almost the worst of both worlds.

Ok, so we already know how to park our iron nest egg. Stocks and bonds are a bit more complicated, but do not worry, it’s not that wild.

Anyone who knows me a bit better knows that I think a lot about ETF, Exchange Traded Funds. These can easily be used to build very broad and well-diversified positions.

Diversifies because ETFs are index-based and, if properly selected with only one fund, you can get the same number of hundreds to thousands of companies in your portfolio.

Many thousands of securities that you can put into your portfolio so efficiently. That’s what I call diversified. And on the stock market, diversification is our religion, because it guarantees us one of the few scientifically proven benefits we can take with us.

On average, diversified portfolios have a better risk-return ratio than portfolios consisting of just a few individual positions.

In addition, ETFs are extremely cost effective. The SPDR S & P 500 is currently available from 0.0945% pa, yes read correctly. Compare that with actively managed funds that your bank adviser wants to turn to.

I assume that the increasing popularity of ETF over the next few years will make the TERs (Total Expense Ratios – the total cost of the fund) tumble even further.

There are ETFs for both stocks and bonds. Therefore, I never buy stocks or bonds individually, but always “in bulk” in the form of an ETF. So I cover in my table from above an area very efficiently and diversified.

If you want to know more about ETF, I recommend my post ” What is an ETF and what happens in case of bankruptcy? “. Beginners and old hands will find something there as well.

So if we want to invest 10,000 euros, then I propose the following vehicles:

Iron nest egg: daily allowance

Shares: ETF

Bonds: ETF

Simple as that. Believe me, it’s a scientific fact that with this seemingly simple trio you’ll get the best result in the long term. More complicated does not automatically mean better on the financial markets.

7. Find the right ETF

Now we come slowly to a more tricky part. In order to invest your 10,000 euros, it is not enough to just decide on a vehicle, but we also have to think about which model and what equipment we want to board the stock market.

And the offer is simply overwhelming, especially with the selection of indices that I would recommend to you.

So, right now, or right after you finish reading, your task with the following small list of indices is to look over to JustETF and to research a bit what ETF is about.

shares
  • STOXX Europe 600
  • S & P 500
  • MSCI World
  • MSCI Emerging Markets
bonds
  • Bloomberg Barclays Euro Aggregate Bond
  • Bloomberg Barclays Euro Corporate Bond
  • Bloomberg Barclays Euro Government Bond 1-3
  • Bloomberg Barclay’s Global Aggregate Corporate (EUR Hedged)

 

This is a selection of, in my opinion, appropriate indexes for ETF. But that does not mean that there would be no more than these. It is, as I said, a selection.

As another rule of thumb, as you can see a good index: It contains more than 500 companies, preferably 1000 and more. Best of all from different regions, sectors and in all possible variations.

I deliberately do not name a concrete ETF by name, because your own research will automatically familiarize you with the topic and help you to gain security.

Hey, no one has argued that investing 10,000 euros does not mean a bit of work either.

Summary and checklist

Checklist: Create 10.000 Euro

    • To begin!
    • Place iron nest egg on overnight money
    • Determine the purpose of the investment
    • Determine investment horizon
    • Assess your own risk appetite
    • Specify investment vehicle or ETF
    • Stay calm even in crises
    • Keep going

Conclusion

Investing 10,000 euros is not rocket science. There are a few simple basics of the stock market to learn and to ask yourself a few deliberate questions.

It is also important to become aware of one’s own emotions, such as greed and fear. Because on the stock market, risk is not your biggest enemy, but you.

The nice thing about being able to invest the knowledge for 10,000 euros is the same as if you want to create 1 million euros. It’s almost perfectly scalable, as it’s called.

This means for you, that you have learned by the way and automatically the basic tools for your further life as a self-determined investor and that in just 15 minutes.

At the beginning of my life as an investor I also faced the same questions and challenges as you. Then I started according to the scheme described above and gained my experience and would like to pass this on to you so that you have it easier than I did then.