Do private individuals really need a lot of cash to start investing? “Investing doesn’t require a lot of cash to get started,” according to , head of direct investing at Swissquote Bank Europe, an online financial services provider with roughly €62bn in client assets. “Nowadays, it is possible to invest even small sums without facing high costs. The main hurdles to investing are likely the ability to save enough money, understanding financial concepts well enough to make informed decisions, and having the discipline to adhere to an investment plan over time.”

“Experience is key when it comes to investing, so it is best to begin early with small amounts to gain valuable insights and be well-prepared when larger capital becomes available,” commented Georg Joucken, head of private banking at Banque Raiffeisen. “Moreover, waiting until you have a significant capital before investing may result in losing valuable time to benefit from the long-term growth potential of the markets.”

Joucken noted that “Banque Raiffeisen offers savings plans that allow investors to start with €50 per month, providing beginners with a first experience in financial products.” Swissquote has “more than 100 exchange-traded funds (ETFs) that are free to buy, with a minimum investment of just €1,500,” Lauret stated. “Regularly investing in such a plan enables investors to gradually build capital and, in general, have a positive experience with financial markets,” said Joucken.

Time is the investor’s ally

In general, time works to an individual investor’s advantage. That’s why Joucken and Lauret said that regular and consistent contributions to an individual’s savings and investment portfolio are important. Joucken explained that “regular investing helps reduce the impact of market fluctuations by smoothing out risks. It is nearly impossible to predict the best time to invest, but by saving each month, one invests at different price levels, thereby limiting the effect of market variations.” Lauret remarked that: “Investors often make the mistake of investing more when they feel optimistic about market performance and less when they’re pessimistic, buying high and selling low. It’s generally better to ignore market noise and invest consistently.”

“Above all, it is essential to define one's investment horizon to avoid having to sell at a loss in case of a need for liquidity,” Joucken stated. “Time is a crucial factor, especially for more volatile investments such as stocks. Historically, stock markets tend to grow over the medium and long term, helping to counter inflation and generate attractive returns for patient investors.”

“Time is a significant advantage for individual investors because of compound interest,” said Lauret.  “If you start investing at 25, contributing €500 monthly could grow to €1.5m by age 65, assuming a 7.5% annual return.” Joucken provided another example: “a savings plan for a newborn, investing €50 per month at an annual rate of 3%, will result in a capital of €14,297 by the age of 18--of which €3,497, or 32%, is gained compared to the total amount invested” by their parents: €10,800. “At an 8% annual rate, the capital would reach €24,004, with a gain of €13,204, +122%, offering better financial preparation for long-term projects such as education, home purchases or retirement planning.”

Lauret added that: “compounding only benefits you when you see positive returns on your investments, which aren’t guaranteed. Investments can fluctuate, making diversification across various asset classes crucial to mitigate risks and significant losses. Not investing at all also carries risks, as cash loses value over time due to inflation.”

Cash on hand

Many households keep a large amount of cash in their savings account. Is this a good or bad idea? How much should individuals keep in cash and how much should they dedicate to investing? In Joucken’s view, “there is no ideal amount of cash to keep on hand, as it depends on each individual, their risk appetite and their financial goals. However, it is essential to have an emergency fund to handle unexpected expenses or cover planned expenditures. On the other hand, holding too much cash can lead to a loss of purchasing power, as savings account returns are generally lower than inflation.”

“While it’s important to have cash on hand for emergencies, statistics show that the average European household held 41.1% of its financial wealth in cash and bank deposits in 2022, according to the European Fund and Asset Management Association, which could be considered excessive,” said Lauret. “Households should indeed keep enough cash in their savings to cover unforeseen expenses, but this amount should be tailored to individual circumstances. Factors like job security, the need to support family members, or maintain a fund for home repairs can vary greatly from one household to another.”

After establishing an emergency reserve, “it is often preferable to invest any excess funds in assets that offer better potential returns, such as investment funds, stocks or bonds,” Joucken said. “Additionally, most financial products offer good liquidity, allowing investments to be quickly converted into cash if needed.”

Beyond savings account

What are some alternative options to the classic savings account? “For alternatives to traditional savings accounts, there’s no perfect match for emergencies in terms of safety and access,” said Lauret. “However, for those comfortable with taking on additional risk, there are several options like bond funds or ETFs that could potentially offer higher returns. In periods of stock market turbulence, bonds often behave inversely to stocks, providing a potential source of liquidity without the need to tap into savings.”

“Bond funds, for instance, can deliver income exceeding that of a conventional savings account, particularly once interest rates have peaked,” Lauret pointed out. “Investors might consider constructing a portfolio of high-quality government bonds, spread across various maturities. Shorter-term bonds, with their brief remaining term, carry less price volatility risk than their longer-term counterparts, serving as a feasible savings alternative, though they don’t guarantee the return of all capital.”

“Another liquidity option is Lombard loans, which enable borrowing against one’s investment portfolio without liquidating assets, thus preserving potential for capital gains and income,” Lauret said. “However, like any form of credit, Lombard loans come with risks and are generally suited for well-qualified investors.”

Joucken said “it is advisable to seek guidance from a professional who can recommend solutions tailored to the client's risk profile and sustainability preferences, while also considering their knowledge and experience.”

Exchange-traded funds

What are ETFs and what type of investor should use them? “Exchange-traded funds are investment vehicles that generally track an index or a basket of securities,” Lauret explained. “They are listed on stock exchanges, allowing for trading at any point during market hours. Most ETFs are passively managed, meaning they mimic indices like the Nasdaq, Dax 30 or Eurostoxx 50, rather than relying on active management where portfolio managers pick investments they believe will outperform the market.”

“ETFs have grown significantly in popularity worldwide, and with a vast array of types available, they cater to nearly every investor’s needs.” Lauret stated. “For those new to investing, ETFs can serve as the foundational elements of a portfolio, providing exposure to both domestic and international equity and fixed income markets. Some ETFs even offer a balanced mix of global equities and bonds within a single fund.”

Investors can use ETFs to balance out the other investments in their portfolio. “For example, if an investor’s workplace pension only includes European assets, they could supplement this by investing in ETFs that offer exposure to international bonds or equities,” Lauret said.

“The ETF itself does not indicate its risk level--it is the choice of the underlying index that determines its volatility and potential return,” Joucken observed. In addition, “for inexperienced investors, it is advisable to seek professional guidance, as some ETFs can be complex and highly risky. Certain ETFs, for example, use leverage or involve complex financial instruments such as derivatives.”

Long-term approach

What are some other suggestions for investors who are just getting started? “While costs shouldn't be your only consideration, they are a crucial factor in ensuring you retain the majority of your investment returns,” Lauret suggested. “Be vigilant about custody fees, which can erode your portfolio’s performance year by year. They might appear negligible when you first start investing, but as your portfolio grows through contributions and investment gains, these fees accumulate into a significant sum.”

“Also, beware of costly investment products,” Lauret added. “Some investment funds come with high management fees and retrocessions [editor’s note: sales commissions] that benefit the banks distributing them, which can markedly diminish your investment's annual performance.”

Joucken shared seven principles that will help investors “gradually build a strong financial portfolio while minimising risks.” They are: “Diversify your investments: Avoid concentrating all your capital in a single asset or sector. Respect your investor profile: Assess your risk appetite and sustainability preferences before investing. Set an investment budget: Do not invest funds allocated to short- or medium-term expenses or projects. Invest in products you understand: Always ensure you fully understand the characteristics and risks of an investment before committing. Stay calm: Avoid impulsive reactions to market fluctuations. Don’t get discouraged after a first bad experience: Investing is a long-term strategy. Seek professional advice: An expert can help structure an investment strategy tailored to your profile and objectives.”

This article was originally published in the Paperjam Extra “Investor’s guide” supplement, released with the on 26 February 2025. .

Is your company a member of the Paperjam Club? You can request an individual subscription delivered directly to your home or office. Let us know via .