That’s the most obvious question. Investing is a risky activity, and you could just put the money in a savings account, right?
You’re right in that investment in securities is risky and does not guarantee stable growth — both sharp ups and unexpected downs can easily happen. There are no guarantees in investing.
So, yeah, a savings account might seem a good option: governments usually guarantee deposits up to a certain amount. In most European countries, including Germany, France and Spain, it’s 100,000 euros. And the interest rate should protect against inflation, right?
It should, but not these days.
“When interest rates are low — and right now they’re at record lows or in some cases even negative — and inflation continues to exist, the money you have in your savings account will still lose value. Often, you’re also barred from withdrawing the money for a period of time in order to lock in a more favourable interest rate.”
So there is no 100% safe way to grow your money faster than inflation. Investing, when done right, is still your best option.
To be clear, we’re not encouraging you to give up savings accounts and spend all your money on shares. On the contrary: a savings account is still a good idea. But the most efficient (and the safest) way to increase your investment is to split it into several parts.
Over the course of the next few chapters, we’ll walk you through the key terms and definitions of investing. You’ll learn about stocks, bonds, and everything in between. We’ll explain stock exchanges, brokers, why stock prices change and we’ll even walk you through the process of building a portfolio and figure out your risk appetite.
Let’s get started.