Lending

The world of finance and investing can be very confusing when you first start out. It has been the same for me. I have long avoided exposing myself to financials. Althought I am currently only 21 years old, I could have started earlier getting to know my financial situation and dealing with it. A lot of people, myself pre 2020 included, are afraid of tackling their financials, because it seems like such a huge field with so much to know and too much to do. It is often just a hurdle that seems to tall to step over.

Sometimes I spend my off-days just randomly spinning around YouTube watching videos. On some days this can lead to very interesting things. On these days I stumble upon a video that peaks my interest in topics I have not dealt with before. When that happens, it usually is a life changing day for me.

This happened to me early this year (2020). I stumbled upon a video from a German YouTuber named “Homo Oeconomicus” about ETFs and stocks. I have been subscribed to this YouTuber for some years now. In 2018 he kickstarted the idea for me to open an online business selling T-Shirts. In this day and age, that really is nothing special, but still it sparked the first little interest in earning money besides my main job.

This year, with his video, he inspired me to use the money I earn from my job and my side hustles in a way that makes me some more money. Until now I have basically been living paycheck to paycheck as my income is not that high at the moment and I have not taken care of my expenses that well. The video I watched sparked a day of watching many many finance videos from many different YouTubers. It also lead to six new subscriptions for YouTubers I have not watched before. I have to say, I learned a whole lot that day.

The following days I really started to get going with the topic. I downloaded a finance overview app for my smartphone, opened a brokerage account at my online bank and collected an overview of my current expenses. With that knowledge I started to cut down on expenses I did not really need. Most of them were Monthly or Quarterly subscriptions for services. Then I got to understand how much money I really have available in a given month.

Getting into investment for me always will require four steps:

1. Get an overview of your finances and get rid of unneeded expenses
2. Get rid of debt
3. Establish an emergency fund (3 month of expenses)
4. Start Investing

As I managed to get the first step done and also have no debt at the moment, I was able to immidiately go to step three. But at that point I got a little bit greedy. I skipped step three, because I knew, that I would receive a bigger payment besides the usual, which I could use to establish my emergency fund afterwards. This worked out for me so far, but I would not recommend that to anybody else going through these steps, as you essentially rely on luck that no unordinary expenses come your way until you established your emergency fund.

Nevertheless, I started my Investing journey by choosing an investing strategy. Every investor should have a strategy, as everything else would then just be based off of emotional decisions. And emotional decisions are horrible in the finance world. They can cost some people a lot of money, especially in time of downturns like the COVID-19 outbreak.

The strategy I have chosen for myself is a Stock and ETF picking buy and hold strategy. For everybody not familiar what that means: This is a strategy, where I research companies (mainly Blue chip companies) I want to own myself. The goal is to buy these companies with a horizon beyond 10 years. So basically I find a company I like, invest in it and keep it for a very long time. I also focus a lot of my attention on dividend paying stocks. These are stocks that payout investors a certain amount of the money earned every so often (Monthly, Quarterly, Annualy etc.).

I find this strategy to be the perfect balance for me between passive and active investing. I really like the concepts of passive investing, meaning buy and holding a stock for a long time and really going with the long term upward trend of the markets. But I also really enjoy researching different companies and getting to know them really well. This makes me believe, that I can make some better decisions, than the overall market indices by gaining some prior knowledge. Some people may find it silly, but I think I have a better feeling, when I exactly know what is in my portfolio and not just blindly invest into thousand of companies all over the world. That is why I keep the percentage of ETFs in my portfolio relatively low in comparison with stocks.

So this is everything I had to deal with before making my first purchase in the stock market. But do not worry. This sounds like a lot, but when you get to know some different strategies and philosophies, you will very quickly find out how much risk you are willing to take and which strategy you would enjoy executing.

Then it was time for my first purchase in the stock market. I was a bit nervous, as I had no idea how this would work out and what I exactly had to do. But in the end it was very easy and my order was successfully executed immidiately. After that I think I spend way to much time looking at the stock trend every minute. This also did not go away in the following days. I only cooled off after some weeks.

After being invested into the market for some weeks I discovered P2P-Lending. I have breifly swept over it in my initial research, but then I really picked it up and registered myself on the biggest P2P-Lending plattform there is currently.

There I also invested a small amount of money to get familiar with the conecept of being the person who is lending money to other people. That also took some getting used to. Now it is quite normal to me thinking about it. Everything is not as scary as it was in the beginning.

Some would consider me unlucky, because of the time I got into the market. But actually I think I am very lucky. Many people have been investing for many years without experiencing a real downturn in the market. This means they have been staring at green numbers for many years on end. This makes it even scarier for them to now look at some red numbers all of the sudden.

I never had this problem. From day 1 my portfolio has been red. This means it is exactly the opposite for me. I am very used to seeing red numbers in my portfolio and I have to say, that I am not scared of that at all. It gives me confidence, that I joined exactly at the right time to experience this and get to have a great opportunity to buy into the market right now. For me it will be something very archieving finally seeing some green in my portfolio in a year or so. I will feel like I have earned that by staying robust during this downturn and even having the courage to get into it even deeper as the market breaks down.

A lot of people have now sold their assets, they have been saving up for a long time, because they fear something. I do not have that fear at all and I think, because of this experience with the market right now I gained something valueable for the years and downturns to come. I feel like no downturn will put that much fear into me, that I suddently feel the urge to sell everything. I feel like I will be able to sleep well during those nights without having an internal crisis. I feel like this is the greatest and at the same time most idiotic advice I would give to someone who is starting out: “Starting short before or during a market crash”.

But this does not mean, that I suddently start to misjudge my risks. I am aware of the great risk the stock market and especially the P2P-Lending market bring with them. It is always a balance between risk and returns. I would never go out and buy risky options, penny stocks or give out credits with 20%+ return. This is way above my risk level and I do not have the goal to become greedy, just because the returns look so promising. That is another great advice I can give to people new in Investing.

To conclude, the world of finance and investing is endless. It comes with minimal risk and minimal returns all the way to high risk with high returns or total demise. Be careful and mind the steps you have to take before actually start investing. Everybody has a unique perspective on the market and their own opinions. So always inform yourself, but never let somebody else be your source of opinion and believe.

Stay safe and good luck!