Taking your first steps in investing: what to consider

Getting started in the world of finance can be confusing. There are many factors to take into account and, above all, a lot of ambient noise. When should I begin? How much should I start with? What type of product should I invest in? These are some of the questions that nag an investor when first starting out. It’s natural to ask yourself questions, and even more so when your own assets are at stake.

So we are going to highlight a series of key issues that you should take into account before stepping into the world of investing. And we’re going to do it with one of the most prestigious investors in the world: Warren Buffett. At the age of 93, the chairman and CEO of Berkshire Hathaway has built up a fortune of more than $116.5 billion. He began to amass that fortune at the age of 11, when he bought his first stock. Even today, he regrets having started to invest in the stock market too late. So let's dive straight into Buffett’s lessons, because there's no time to lose when it comes to putting your money to work.

1. “Never invest in a business you don’t understand”

Knowing what you’re dealing with is crucial in all aspects of life, and that’s just as true when it comes to investing. It’s essential to educate yourself on the different types of assets in which you might invest (stocks, bonds, funds, pension plans, etc.), as well as different investment strategies.

See our practical guide on how to choose a mutual fund.

It is also important to stay informed of the current market situation and the outlook for the future. The market is constantly changing. That is, you never know for sure what’s going to happen, so you should try to keep abreast of everything that does happen so you can act accordingly.

2. “Time is the friend of good business”

Investing with a long-term perspective is generally more beneficial than seeking a quick profit. This doesn’t mean that profits cannot be generated in the short term, but the market can certainly be more volatile in a shorter period.

A well-thought-out strategy will help you stay on track and avoid rash decisions in times of uncertainty.

To have that time and establish a correct long-term strategy, as Buffet rightly says, you have to start as soon as possible and take that step from being a saver to being an investor.

3. “Be mindful of your reasons for investing”

Setting clear goals is key in order to be able to achieve them, whether your goals are to buy a home, save for retirement or your children's education, or just to beat inflation. Your goals in entering the world of investing may be diverse, but knowing what they are is essential in setting out a strategy to follow.

If you don’t set goals, it will be very difficult for you to achieve the sort of results you want. You will always be expecting to make a profit and you’ll never focus on the exact amount you want to gain.

4. “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks”

This quote from famed value investor Warren Buffett is a bit more metaphorical. But he’s saying that it's important to know when to make changes in your investments. Periodically reviewing your portfolio is essential to ensure that your investments remain aligned with your financial goals and the market situation.

Over time, some assets may outperform others, which could lead to an imbalance in your portfolio. Periodically adjusting the balance will help you keep your investment strategy on track.

Here, active management in mutual funds can be a great ally in coping with market swings.

5. “Price is what you pay; value is what you get”

When you decide to make an investment, you must be aware that you will run risks. For this reason, identifying your risk tolerance is essential to building a portfolio that aligns with your comfort level and prevents unpleasant surprises.

There is no right formula. Some may be willing to take on greater risks in exchange for the possibility of higher returns, while others prefer safer options, even if their returns are lower.

6. Seek out advice

This is not a Warren Buffett quote, but it is a key lesson. If you are new to the world of investing, it is always a good idea to work with an expert professional. They will help you see everything in greater perspective and make better decisions.

Starting to invest can be an exciting experience, but don't forget the risks and responsibilities that come with it. Remember that each investor is unique, and what works for one may not be best for another. Find the path that best suits your needs and financial goals.