01 What kind of investor are you?

There are several things to consider once you start investing. A good starting point is thinking about the type of investor you want to be. What is your investment style? Will you be an active or passive investor? This lesson will help determine what kind of investor you are.

Text version

person thinking about an active or passive investment strategy

Entering the financial market

Once you start investing, there are several things to think about. But it all starts with thinking about the kind of investor you want to be. This lesson will look at what you can consider whilst getting started, and what different investment styles can be identified.

Investing or saving

Maybe you only held a savings account till now. But savings and investments can complement one another well. When you look at the average stock market return over a long enough time frame, it becomes apparent that it has yielded a higher rate of return than the average savings account. This might be one of the reasons why investment accounts have become more popular. In these lessons, we will talk more about how investment accounts work, and which different types of financial products you can buy.

Considerations

Before you start to invest, there are a number of factors to consider. It helps to think about the risk level that you are willing to take on, and what types of products are best suited to reach your goals. For example, starting to invest when you are younger means a longer investment horizon. This is due to the extra time you have in case you need to recover from a declining stock market. Comparatively, you must be willing to take on a higher degree of risk for more returns within a short time frame.

Investment styles

Because investors will have different goals and strategies, a number of investment styles can be recognized. These can be broken down into two main categories; active investing and passive investing.

Active investors aim for high return in a short period of time.

Active investing is also known as trading or speculation. These investors will spend their time monitoring stock exchanges, responding to movements in the markets, and may use more complex financial instruments like options and futures. Here, the focus is typically on the short term, and with the aim to earn a higher return than the market average. It requires significant time and knowledge. Therefore, this investment style is typically not suitable for the beginning investor.

passive investors aim to minimize risk over a long period of time.

Passive investingon the other hand is focused more on investing across a longer timeframe. Those following a passive style will buy less volatile and more diversified products in order to spread the risk across investments. This way, losses of single volatile stocks can be offset by profits of others. Research is needed less frequently, and the market does not need to be continually monitored. To help you with this, there are financial instruments such as trackers to purchase a basket of stocks in a single position. By spreading your investments this way, returns will more closely follow the market average. This method of investing has become increasingly easier and for this reason popular with starting investors.

Coming up

If you plan to start managing your portfolio, you can do this based on what investment style suits you best. In the upcoming lessons, you will learn more about how this works and about the different types of financial products that are available. We will also give you more insight into the underlying fundamentals of the market and how you can get started investing.

There are several things to consider once you start investing. A good starting point is thinking about the type of investor you want to be. What is your investment style? Will you be an active or passive investor? This lesson will help determine what kind of investor you are.

Text version

person thinking about an active or passive investment strategy

Entering the financial market

Once you start investing, there are several things to think about. But it all starts with thinking about the kind of investor you want to be. This lesson will look at what you can consider whilst getting started, and what different investment styles can be identified.

Investing or saving

Maybe you only held a savings account till now. But savings and investments can complement one another well. When you look at the average stock market return over a long enough time frame, it becomes apparent that it has yielded a higher rate of return than the average savings account. This might be one of the reasons why investment accounts have become more popular. In these lessons, we will talk more about how investment accounts work, and which different types of financial products you can buy.

Considerations

Before you start to invest, there are a number of factors to consider. It helps to think about the risk level that you are willing to take on, and what types of products are best suited to reach your goals. For example, starting to invest when you are younger means a longer investment horizon. This is due to the extra time you have in case you need to recover from a declining stock market. Comparatively, you must be willing to take on a higher degree of risk for more returns within a short time frame.

Investment styles

Because investors will have different goals and strategies, a number of investment styles can be recognized. These can be broken down into two main categories; active investing and passive investing.

Active investors aim for high return in a short period of time.

Active investing is also known as trading or speculation. These investors will spend their time monitoring stock exchanges, responding to movements in the markets, and may use more complex financial instruments like options and futures. Here, the focus is typically on the short term, and with the aim to earn a higher return than the market average. It requires significant time and knowledge. Therefore, this investment style is typically not suitable for the beginning investor.

passive investors aim to minimize risk over a long period of time.

Passive investingon the other hand is focused more on investing across a longer timeframe. Those following a passive style will buy less volatile and more diversified products in order to spread the risk across investments. This way, losses of single volatile stocks can be offset by profits of others. Research is needed less frequently, and the market does not need to be continually monitored. To help you with this, there are financial instruments such as trackers to purchase a basket of stocks in a single position. By spreading your investments this way, returns will more closely follow the market average. This method of investing has become increasingly easier and for this reason popular with starting investors.

Coming up

If you plan to start managing your portfolio, you can do this based on what investment style suits you best. In the upcoming lessons, you will learn more about how this works and about the different types of financial products that are available. We will also give you more insight into the underlying fundamentals of the market and how you can get started investing.

First Lesson

backtotop

Your investment journey starts here

Open a free account and join over 2.5 million investors worldwide on our user-friendly platform.

Note:
Investing involves risks. You can lose your invested funds. We advise you to only invest in financial products which match your knowledge and experience. This is not investment advice.

Investing places your capital at risk. Read our full warning here.

icon_close

We want to empower people to become the best investors they can be. By offering a universe of possibilities and choices on our user-friendly platform, we are removing barriers to make investing accessible to everyone: beginners or experts. You get access to a wide variety of products on more than 50 global exchanges to have the freedom to invest the way you like. In our world, you also get great value for money. So, without compromising an inch on the quality, security and range of our investment services, we offer incredibly low fees. Prioritising your needs has helped us become the leading European online broker. Our 2.5+ million clients and 100+ international awards are proof of our success.

This communication is issued on behalf of flatexDEGIRO Bank AG and has been approved as a financial promotion on 3rd August 2023, for the purposes of section 21 of the Financial Services Market Act 2000 (FSMA), by Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN:574048). flatexDEGIRO Bank AG is an overseas firm which is not authorised by the Financial Conduct Authority. This means that the FCA Rules made under FSMA for the protection of retail clients do not apply to the services provided by flatexDEGIRO Bank AG but investors are instead protected under applicable German law and Dutch law rules that apply to flatexDEGIRO Bank AG. Investors are not protected by the UK Financial Services Compensation Scheme.

flatexDEGIRO Bank Dutch Branch, a foreign branch of flatexDEGIRO Bank AG | Amstelplein 1, 1096HA Amsterdam | phone: +31 20 261 3072 | e-mail: clients@degiro.com | flatexDEGIRO Bank Dutch Branch is registered with the Dutch Chamber of Commerce under number 82510245. | flatexDEGIRO Bank Dutch Branch, trading under the name DEGIRO, is the Dutch branch of flatexDEGIRO Bank AG. flatexDEGIRO Bank AG is an overseas company primarily supervised by the German financial regulator (BaFin). In the Netherlands, flatexDEGIRO Bank Dutch Branch is registered with DNB and supervised by AFM and DNB. | flatexDEGIRO Bank AG is a licensed German bank supervised by the German financial regulator and registered with the German Chamber of Commerce under number HRB 105687.