How to Start Investing as a Beginner

Investing can seem intimidating when you're starting out, but with the right approach, it becomes much simpler and highly rewarding. This guide provides you with a clear and comprehensive roadmap to begin your investing journey safely and wisely.

Should You Invest as a Private Person or Create a Company?

Deciding whether to invest as an individual or through a company depends on several factors, such as your financial goals, investment size, and transaction frequency.

Investing as a Private Person

Investing as an individual is straightforward and quick to set up. It typically involves less paperwork, simpler tax reporting, and is ideal for smaller investments or beginners who are still exploring.

• Easy setup process.
• Less paperwork required.
• Lower tax implications due to the lack of a company structure.

Investing via a Company

Creating a company for your investments can be beneficial if you're handling larger amounts, making frequent trades, or aiming for tax efficiency. A company allows you to defer tax payments until profits are withdrawn and provides more structure and potential legal protection.

Recommendation: Start investing as an individual first. Once you gain experience, significantly grow your portfolio, or engage in frequent trading, transitioning to investing through a company may become more advantageous.

How to Choose ETFs and Start Investing

Exchange-Traded Funds (ETFs) are a powerful tool for beginners because they offer diversification, easy management, and usually have lower fees compared to actively managed funds.

What to Look for in an ETF

• Low Expense Ratios: Keep your investment costs low by choosing ETFs with minimal management fees.

• Sensible Valuation (P/E Ratio): Aim for ETFs tracking markets with a lower price-to-earnings ratio, preferably below 17-20, unless investing in rapidly growing sectors.

• Sector Potential: Invest in ETFs that track sectors anticipated to experience substantial growth in the next 5-10 years, such as technology, healthcare, or renewable energy.

• Diversification: Spread your investments across multiple sectors and multiple geographical locations to minimize risks as over time different sectors and locations perform differently.

Examples of ETFs Suitable for Beginners:

Here you can see Daedra Capital's selection for ETFs suitable for beginners:

• Vanguard FTSE All-World UCITS ETF Accumulating (VGWE) – Global exposure with good dividend potential.
• Vanguard S&P 500 UCITS ETF (USD) Distributing (VUSA) – Exposure to the largest U.S. companies.
• iShares Core MSCI Emerging Markets IMI UCITS ETF Accumulating (IS3N) – Access to rapidly growing emerging markets.
• iShares Core MSCI Europe UCITS ETF EUR Accumulating (EUNK) – The European market is a global leader in terms of GDP and population.
• iShares Emerging Markets Dividend UCITS ETF Distributing (EUNY) – Dividend-focused emerging market companies.

Accumulating means that all earnings are reinvested automatically within the ETF, you don't need to pay additional taxes.

Distributing means all the dividends are paid out to you, and you need to pay taxes on these dividends. But you can see the dividends as income on your account, this can increase your motivation to continue with the investing. If this is something that does not matter to you, then select only Accumulating funds.

How to Start

Set up a brokerage account with your bank or an online investment platform. Start small, and invest regularly every month (Dollar Cost Averaging). This approach minimizes risks and helps avoid market timing mistakes.

Even if you get inheritance on win a lottery then spread the investments over time to reduce market risks. You can initially allocate the money on multiple term deposits each ending on different month so you get the money out with small interest gains just in time to invest in ETFs.

Key Investing Principles for Beginners

Clear principles guide you in making consistent and rational decisions:

• Margin of Safety: Invest only when a stock or ETF trades below its intrinsic value to provide a buffer against market volatility.
• Value Investing: Focus on businesses with solid fundamentals, proven earnings, and manageable debt levels, priced reasonably.
• Dividend Focus: Regular dividends provide a steady income stream and cushion during market downturns. Aim for stocks with consistent dividend yields of at least 5% annually.
• Sector Diversification: Spread your investments across different asset classes, sectors, and geographic regions to mitigate risks.

Basic Portfolio Allocation Strategy for Beginners

Here's a simple allocation plan for beginners with a portfolio under 250,000:

Asset Class	Allocation
ETFs	70%
Individual Stocks	15%
Bonds	5%
Cash & Equivalents	10%

As your portfolio grows beyond 250,000, consider increasing exposure to individual stocks, bonds, and potentially adding REITs or speculative investments such as startups, depending on your risk appetite.

Simple Rules for Successful Investing

Follow these straightforward investing rules:

• Consistency: Invest regularly, regardless of market fluctuations, using Dollar Cost Averaging to smooth out market volatility.
• Long-Term Mindset: Invest with a 5-10+ year horizon, avoiding impulsive selling or buying.
• Periodical Review: Evaluate and rebalance your portfolio periodically, such as quarterly or semi-annually, to ensure it aligns with your goals.
• Avoid High P/E Ratios: Be cautious about investing in high P/E ETFs (17+) or stocks unless justified by significant sector growth potential.

Example Beginner Portfolio

A practical example of a well-rounded beginner portfolio might look like this:

• ETFs: 70% diversified globally, including the U.S., Europe, and emerging markets (e.g., Vanguard All-World, S&P 500 ETFs).
• Individual stocks: 15% value-focused, dividend-paying stocks.
• Bonds (ETF): 5% in investment-grade bond ETFs.
• Cash (Savings Account): 10% held in easily accessible savings accounts or multiple term deposits. Make funds available for you each month.

This balanced approach follows Warren Buffett’s timeless investing wisdom: simplicity, patience, value orientation, and discipline.

Final Thoughts

Investing doesn't have to be complicated. Start small, invest regularly, maintain discipline, and always stay informed about your investments. Over time, these simple habits will compound into substantial financial growth.

PS!: Tap to your inner dragon, listen to your reason and hold your emotions in check.

Happy investing!