Long-term planning but in line with demand
If you earn money, you have to learn how to handle it. On the one hand, it is important to be able to cover the needs of daily life and, on the other, to ensure long-term financial stability. Satisfying the basic needs of a human being is only the absolute basis.
In practice, we see thatprivate wealth management is a complicated matter for many people. Often there is a lack of time and knowledge to take care of professional asset management. However, especially with regard to the different phases of a life, it is important to tailor investments to individual needs and goals. These often differ greatly in focus and the difficulty lies in implementing both current and long-term planning.
Investing money in different phases of life
Unfortunately, there is no ” official” division into life phases. Based on our many years of experience, we can identify four broadly different phases, which, as already mentioned, are very different from each other.
The first phase, which we unfortunately do not have in our own hands, is childhood. Here, the foundation for a solid start in life can already be laid by one’s own parents. Long-term savings models, real estate and the targeted use of tax allowances can thus ensure initial returns and a financially independent life. However, the liquidity requirements of the parents and the financial preconditions are very individual and can therefore hardly be influenced.
With the end of childhood, in the second phase, you now have your finances in your own hands. At a young age, many people are still at the beginning of their career or are studying and often have not yet built up sufficient assets to invest in different areas in parallel. Depending on your personal perception of risk , you can choose a risk-conscious investment strategy. For example, investments in shares or equity funds would be conceivable. These can bring high returns in the long term if the market is entered appropriately. A high return is always accompanied by a higher risk. Therefore, the investor’s risk tolerance should definitely be considered.
Liquidity also plays an important role at a young age. After all, those who do not yet have a great deal of financial security often need money in the short term. It is therefore advisable to keep part of the assets in liquid investments, such as call money or time deposit accounts.
And he third phase, in middle age, many people have already built up solid assets or have stable incomes. The task now is to secure the assets and achieve further financial goals. A balanced investment strategy with a broadly diversified portfolio of stocks, bonds and funds can be the right choice here, but real estate for private use also plays a major role in this phase of life. Issues such as family planning, career and the financial circumstances of one’s parents have an enormous influence on the choice of investment strategy. Liquidity also continues to play an important role, as unexpected expenses or sudden changes in life situations can occur.
In the last phase, in old age, asset management once again becomes particularly important. The main focus here is on preserving assets and generating a regular pension via pension funds and conservative investment strategies. At this stage, it is difficult to increase one’s own assets and it is not possible to do so, at least not by working. Nevertheless, this phase also offers opportunities to further expand the assets.
But inflation should also be taken into account. This is because the purchasing power of assets can decrease due to inflation. A regular review of the investment strategy and an adjustment to the current market situation are therefore very important.
How can I invest my money?
- Passbook:Passbook is an easy way to save money, but it usually offers little interest.
- Fixed-term deposit: Here, you invest a fixed amount for a certain period of time and receive a fixed interest rate in return. Interest rates are often higher compared to savings accounts, but the money is usually not available for the period of investment.
- Shares: Shares are interests in a company and can be purchased on the stock exchange. They offer a higher return than savings accounts or fixed-term deposits, but also carry a higher risk.
- Investment funds: Here, the money of many investors is pooled and managed by a professional fund manager. There are different types of mutual funds, such as equity funds, bond funds or mixed funds.
- Riester pension:This is a state-subsidized private pension plan for which the state grants annual allowances. The money is invested in annuities or fund savings plans. The opinion on this is probably common knowledge.
- Company pension plan: The employer contributes to the employee’s pension plan. There are various models, such as direct insurance, the pension fund or the relief fund.
- Real estate: Real estate can serve as an investment property and generate regular income through rental income. However, the purchase of a property is associated with high costs.
Alternative forms of investment beyond the mainstream
Of course, there are other investment options for private retirement planning and managing your own assets. Below you will find some of them as examples:
- Precious Metals: Gold, silver and other precious metals are considered safe investments and can provide a hedge against inflation. There are several ways to invest in precious metals, such as buying coins, bars or certificates.
- Crowdinvesting: Here, private investors can invest in various projects via platforms, such as start-ups, real estate or renewable energies. There are various models, such as participation loans, profit participation rights or subordinated loans.
- ETFs: ETFs (Exchange Traded Funds) are passive funds that track a specific index such as the DAX or the S&P 500. They offer broad diversification and low costs.
- Bonds: Bonds are debt instruments issued by companies or governments that offer regular interest payments and a return of the invested capital at the end of the term.
- Private equity: This involves investing in unlisted companies or start-ups. Private equity can offer a higher return than other asset classes, but also carries a higher risk.
- Cryptocurrencies: Cryptocurrencies such as Bitcoin or Ethereum can offer high returns, but also carry a high level of risk. They should only be considered by experienced investors.
Complex asset management
- Tax law advice and tax representation in Germany
- Advice on assets in Germany and the EU
- Advice on complex asset management
- Accounting and asset management
- Communication with authorities
- Holistic organization of an asset management
- Review of existing asset management
- Advice on the topic of inheritance in Germany
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About the author
PhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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