The five pillars of responsible (micro)investment

Investing has become a buzzword lately. The media publishes investment specials, credible (even slightly less credible) educational programs have emerged on the market. Sometimes it's difficult to navigate, isn't it? Especially for those who are just thinking about investing and haven't even taken the first step, the whole thing can feel like a Spanish village. This is why we wrote in INVESTOWN Principles of Responsible Investingthat everyone should know. Ready? Let's get on with it!
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Principle number one: learn to control emotions

Whether you are a future microinvestor, even choosing to buy an apartment for the investment or plunge into the bowels of the stock markets, the whole thing can be challenging on your psyche. It's about money, after all. And those, too, are linked to emotions. Hell, take ten crowns, but the first time you decide to send tens or hundreds of thousands somewhere, it's clear that it's not going to be easy. It is important to realize again and again that When investing, you need to put emotions aside.

Have you decided to invest? First, think through everything and carefully calculate. And when a small crisis comes or the selected market wobbles slightly, do not take your feet on your shoulders. The reason for the failure of many strivers is the fear of uncertainty. This can result in ill-advised selling when your investment is “below price”, that is, at the worst moment ever. Most of the time, it pays not to panic and wait. Otherwise, you will lose money quickly and easily, and only for the sake of his own head.
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Principle number two: have a long-term strategy

Investing is shrouded in a shroud of prejudice and misconceptions. This one will surely come to mind: a formally dressed young man buys almost at random for hundreds of thousands of crowns, hoping that the chart will grow for a while, or jump from red numbers to green ones. The moment this happens, he immediately monetizes the investment and earns on it... hundreds of percent!

No, that's not exactly how it works. Only dubious websites and American big-screen movies present this kind of investment. Responsible investing means having a long-term strategy, managing assets and increasing their value over time. Whether you are microinvesting or buying on the stock exchange, always think about what your investment will look like in 5, 10 or 15 years.

Here is a simple sample example. While in 2005 you would have bought an apartment in Prague for 20 000 CZK per square meter, this year, with a little luck and with scratched ears, you will fit under 100 000 CZK. Although the average salary was also lower, in 2005 you could earn an average of 19,030 CZK, now we have reached 29,000 CZK on average. Even so, it is incomparable. And now imagine that your investment in an apartment will multiply in the next 15 years, similar to the previous years. Given the currently very high price of real estate, this is not likely, but it will certainly suffice for a demonstration.

Think in the long term. Maybe tomorrow or in a week you will not buy a new car or a dream vacation. But even a few well-chosen investments or micro-investments can pay off well in the long run. Your savings will not be exposed to 3% inflation, and their value will only grow over time.
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Principle number three: count it well

Investing is not a game of chance. That is, if you don't want to. Every investment needs to be carefully calculated. For example, for a standard purchase of an apartment for investment, you may find it useful to calculate the return on investment in an apartment, the so-called. IRR.

Fancy a little exercise? You can save the interactive table as a copy here. In the line Deposit (purchase) you write down how much it cost you to buy an apartment or how much you would like to buy one for. At the same time, in the next lines, you will indicate how much you are reimbursed annually for rent, but from which you will also subtract the total annual costs. In the Current Asset Value line, enter what the property is worth at that moment. The IRR table is very sensitive to time and detail. In order to get the right percentage return in the end, you have to put in really accurate data. How's that working out for you? If between 3-8%, this is definitely a very good result. If more than 8%, you can applaud, such an investment is already very successful!

To be in control not only of your investments, but also of all your own assets, try to create a table of your own cash flow, where you write down your income and expenses every month. Thanks to the cashflow table, you will have an overview of how much money you can invest per month. Even the occasional micro-investment will move you step by step towards your dream financial goal.

TIP: How to create an interactive table of your own cashflow? We'll talk about that again next time.
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Principle number four: educate

Sure, even when it comes to investing, you can “cheat.” Follow those who are doing well, or funnel money somewhere you don't have to worry about. But when it comes to slicing bread, it's mainly those who know what they're doing. If you educate yourself for a long time in the segment in which you invest, larger changes or threats will definitely not escape your attention. This is the only way you can react quickly when something goes wrong.

For example, if you choose to invest in real estate or directly in apartments, it is good to follow trends, increases and decreases in prices in regions, as well as the general state of the market in history. You will also be interested in crises in the field of Airbnb or changes in laws dealing with taxes, rents or neighbourly relations. There's enough to keep up with, but it pays off.

You can also get a general overview by visiting conferences or participating in online webinars. Great information is also available in various courses. Do you like to read? Then you will definitely appreciate the countless investment books that you can find in every bookstore.
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Principle number five: count on (micro) risk

One such equally important principle in conclusion. He who does not try nothing will not lose anything, but neither will he gain! The money stored in the account may lose value due to inflation, but it will certainly not go anywhere. If you try to evaluate them somehow, if only conservatively, you will always be one step further. The surest way is to spread the risk by investing in more things. It's called portfolio diversification. If one investment is not successful, the other will balance it out for you. This reduces the chance that you will lose all your money in the event of an unexpected crisis.