Investing for beginners: where to start as a Belgian

Step 1: Understand the basics of investing

Before diving into investing, it's essential to build a strong foundation. Start by familiarising yourself with the main types of investments:

• Stocks: these represent ownership in a company, offering the potential for high returns but carrying significant risk.
• Bonds: essentially loans to governments or corporations, bonds provide more predictable, stable returns.
• ETFs and index funds: these investment vehicles pool money from multiple investors to create diversified portfolios. ETFs trade like stocks, while index funds aim to replicate the performance of a specific market index.

We'll go in more detail on the different types of investments in step five.

It's crucial to understand the risk-return trade-off. Higher returns mean taking on more risk. You must balance your financial goals with your comfort with uncertainty.

Additionally, decide between active and passive investing:

• Active investing: involves selecting individual investments or funds in an attempt to outperform the market.
• Passive investing: focuses on mirroring the market's performance using low-cost index funds or ETFs.

By grasping these basics, you’ll feel more confident in navigating investing, empowering you to make smarter financial decisions. But first, let's look at the reasons why you should consider investing your savings.

Step 2: Why you should consider investing

The financial future of young Belgians, millennials and Gen-Z, is under threat. Historically there's been a strong reliance on the state to fund our retirement. However, our state-funded pension systems are under increasing pressure due to changing demographics. And our political leaders are not doing what is necessary to prevent a pension crisis.

We need to make our savings work for us in order to set ourselves up for the future and take control of our retirement. We also know that saving accounts are not sufficient and interest rates are at historic lows. With inflation being above interest rates since 2008, this means that every year, we lose money if it’s not put to work.

The solution is to take matters into your own hands by investing your savings. As a potential investor, there are many reasons why investing in the stock market can be beneficial for you. Let's go through some of the benefits of putting your money to work.

Long-term wealth creation

Young investors have a longer time horizon before retirement, which means they can afford to take on more risk and withstand short-term market fluctuations. This enables you to potentially reap the benefits of higher-risk, higher-reward investments such as stocks. The long investment horizon provides the opportunity to recover from market downturns and capitalize on long-term growth trends.

Investing in stocks supports the growth of companies, which, in turn, contributes to overall economic growth. By investing in businesses, you become part-owner and participate in their success. This not only benefits individual investors but also contributes to the prosperity of the economy.

Technical innovations have increased productivity and efficiency, which in turn has lead to positive economic growth over the last 40 years (before as well). The graph below, which shows the evolution of the global stock market since 1979 through the MSCI World index, clearly shows the tremendous growth the last decades. Investing in the global stock market is a way to benefit from this growth. We'll look into investing in ETFs down below.

Step 3: Set your financial goals

Everyone's situation is different, and so should be your investment plan. The plan should align with your personal needs. Ask yourself, what is your investment goal?

This is an important initial question. Why are you investing your savings? Is it for your retirement, to make the most of your savings, to buy a house, to save for your children or to live off your investments?

Make it very clear what you are investing for. Make sure the goal is concrete and specific, has a clear time frame and is measurable:

• Good financial goal: save €10,000 for a down payment on a home in three years
• Poor financial goal: get rich quick by investing in cryptocurrency

As you can see the goal is specific (saving for a down payment on a home), it has a clear time frame (3 years) and it is measurable (€10,000). Such a goal will allow you to regularly follow up and see how much progress you've made.

When investing you should always have a long-term mindset. In the short term the stock market goes up and down, nobody can predict that, not even the big banks. People who trade stocks on a daily basis are nothing more than gamblers. You might have a couple lucky shots, but make sure not to confound luck with skill. A general rule of thumb is that you should be willing to not touch the money you put in the stock market for 10 years.

Once you've figured out your goal, you'll need to answer how long you want to invest for. Your investment goal will also depend on your time horizon, which is the amount of time you plan to hold your investments. If you have a short-term investment goal, such as saving for a down payment on a house in a couple of years, you'll likely want to invest in less risky assets. If you have a long-term investment goal, such as saving for retirement, you may be more comfortable with riskier investments that have the potential for higher returns.

Once you've figured these answers, you can move towards the next step where you're assessing your tolerance for risk.

Step 4: Assess your risk tolerance

A good practice before starting to invest, is creating an emergency fund. This fund should cover at least 6 months of expenses. As such, if a negative financial event occurs you'll be covered and won't have to sell your investments at a potential inconvenient time. In Belgium we have a generous social security system, allowing for lower emergency funds as compared to other countries. Learn how to best save up for your emergency fund.

Figure out your capacity for taking risk

Your capacity for taking risk refers to the amount of risk you can afford to take on without jeopardising your financial situation. Assessing your financial situation is the first step in determining your capacity for taking risk. You should consider your income, expenses, debts, and assets. Understanding where you stand will help you determine the level of risk you can afford to take on.

This isn't based on your feelings but rather on your financial situation:

• Saving capacity: How much can you save on a yearly basis, taking every expense into account?
• Time horizon: Have a look at the assets at your disposal. Do you need a substantial sum in the future? If so, when?
• Loss of income: Assume you lose your job, how long will your savings last to maintain your standard of living?

You also need to recognise that your financial situation and goals (and even your attitude to risk) may change over time. It's also why this process needs to be repeated regularly to make sure that your investment strategy always remains aligned to you and your needs.

What is your risk tolerance?

A common saying in investing is: "There's no such thing as a free lunch". Translated this means that if you're looking for high returns on your investments, you'll need to additional risk. Every individual has their own risk tolerance, so this is something you'll have to assess for yourself.

How much risk are you willing to take? There are different personalities when you're putting your money to work.

How much annual deviation are you willing to tolerate for your portfolio? Are you looking for stable dividend income with little variation? Or, can you accept a potential 20% drop in a given year? And do I want to rebalance when certain assets have under- or over-performed?

Based on your answers to the above questions, you can figure out what your risk tolerance is. This is based on a portfolio of ETFs (more on that below):

Step 5: Decide what type of investment

There's a wide variety of investments for Belgians and we understand it can get confusing to know where to start. There are many ways you can invest your money, going from stocks, to wine, real-estate, art and even digital art through NFTs. But not all are equally good. Many are too risky, or do not yield sufficient returns. When investing for your future and over the long-term, it's important you make a rational and well-thought out decision.

Here's our comparison table to explain the different type of options available to you as a Belgian:

At Curvo, we fundamentally believe in ETFs which we believe are best suited for beginners.

What's an ETF?

An ETF (or exchange-trade fund) is a collection of tens, hundreds, or sometimes thousands of stocks or bonds. This spreading is one of the most attractive aspects of owning an ETF compared to individual stocks and bonds. By investing in a single ETF, you become invested in thousands of companies in one go. The majority of ETFs are designed to track a market index, which is why they're also called trackers.

The style of investing based on indexes is called index investing (also called passive investing), as you typically purchase and hold your investments over the long-term. When passively investing, you choose to ignore day-to-day price changes knowing that the market will keep growing long-term. Data shows that this strategy is most likely to give you the highest return.

Here are some reasons why we fundamentally believe in ETFs:

They are low-cost

Index investors pay low fees because ETFs are very cheap to run. It's simple to track an index: all that is required is buying the stocks in the index, and update when the index changes. It doesn't require expensive analysts or other specialists.

They are diversified

One of the goals of index investing is to diversify as much as possible. Through diversification across many countries and sectors, you eliminate unnecessary risk. And you also benefit from the growth of the best companies in the world, not just the large German, French or American companies you know. By investing in as many companies as possible, you're almost sure of including the winners, namely the minority of stocks that are responsible for the majority of the returns.

Rooted in the real economy

Most index funds invest either in stocks or bonds. Those are backed by real companies, with real factories, employees, intellectual property, and so on. This is unlike, for example, the crypto space, where the value of a currency or token is mostly determined by its potential rather than by concrete applications.

Buy and sell whenever you want

ETFs are very easy to buy and sell. If you wish to, you can trade any ETF within minutes. In finance jargon, we say that ETFs are "liquid". This is an advantage compared to other types of investments such as real estate or art. For instance, when selling a house, it can take a long time before finding the right buyer.

Invest with low amounts

An advantage with ETF investing is that you don't need a lot of capital to get started. You can even invest with as little as €50. This makes ETF investing possible for everyone, especially young people who just started their career and want to grow their wealth by putting their savings. In contrast, real estate is much less accessible. Just the down-payment for a property requires several tens of thousands of euros.

Tax-efficient

In most countries, investing in the stock markets is tax-efficient compared to other types of investments. In Belgium, we don't even tax profits from investments in stocks, making index investing particularly tax-efficient.

You're convinced of ETFs. But how do you start investing in them? You'll need to choose a platform.

Step 6: Choose the right investment platform

With the rise of online trading platforms, investing in the stock market has become more accessible and cost-effective than ever before. There are various investment apps that offer user-friendly interfaces and low trading fees, making it easier for young Belgians to enter the market. This accessibility empowers you to start investing with smaller amounts and gradually build your investment portfolio.

Finding a broker

You can't buy stocks directly on the stock market, you have to do this through an intermediary, a stock broker. There are many different ones with their own pros and cons. We've made a detailed comparison on the best brokers in Belgium. As there are many options available to us in Belgium, it can be difficult to pick the one that makes you feel most comfortable with.

When investing through a broker, one of the most important factors to consider is transaction costs. When investing with small amounts transaction costs will have a relatively bigger impact than when investing with large sums. You also need to consider the security of your assets.

Use an app like Curvo: the work is done for you

We created Curvo to address the challenges of investing through a broker. We started investing through a broker ourselves. Our founder Yoran spent hours researching and figuring out how to build an optimal portfolio to prepare for his financial future. He read books, scoured the web and got lost on Reddit. Finding the right resources was challenging.

From this experience, he realised why none of his friends were setting up their own investments through a broker: it's too complicated. At the same time, we've seen that index investing is such a powerful tool to grow our wealth. So it made sense to build something to solve this problem. Enter Curvo.

Diversified portfolio built for you

We understand that it's hard to build the portfolio that's right for you, so creating an account starts with answering a questionnaire on your investment goals and your appetite for risk. You’ll then be assigned the best portfolio of index funds that matches your goals and risk tolerance. Each portfolio is globally diversified and invests in over 7,500 companies.

Sustainability at the core

The investment portfolios focus on one guiding principle: they don’t invest in companies that are considered destructive to the planet. This means that sectors like non-renewable energy, vice products, weapons and controversial companies are excluded.

Built for monthly investing

You can set up a monthly savings plan where your selected amount is automatically debited from your bank account and invested in your portfolio at the start of each month. This way, it's easy to adopt the best saving habits. Also, Curvo does not charge any transaction fees (although a management fee is due). Lastly, it supports fractional shares, meaning all your money is invested. So Curvo is ideal for monthly investing.

No learning curve

Our goal is to solve all the complexities of index investing through a broker. This means you don't have to worry about:

• Understanding the tax system. The portfolios are already tax-optimised.
• Choosing a broker. There are many options available and it can be hard to pick the one that you feel most comfortable with.
• Rebalancing. It is made sure that your portfolio is kept in balance.
• Calculating and executing your orders every month. It's all set up for you.
• Keeping discipline. We help you stay the course!

Find out how Curvo works.

Step 7: Understanding Belgian taxes

Try to reduce the tax burden on your investment returns. Every euro paid in taxes is a euro less in returns.

If you decide to go for ETFs, try to go for accumulating ETFs rather than distributing ETFs. This way the dividends get reinvested automatically. In Belgium, this saves you on the 30% dividend tax.

As there currently is no tax on capital gains for stocks, the ETF can later be sold tax-free which puts money in your pocket without paying taxes on it. There is also the TOB (Belgian transaction tax) to consider when buying ETFs. We've written about the taxes you need to consider as a Belgian investors if you want to dig deeper.

Step 8: Building your own portfolio

A good portfolio should have several properties to ensure diversification, minimise risk, and optimise returns. Here are some important properties to consider:

• Diversification: A well-diversified portfolio covers different asset classes (stocks, bonds, commodities, etc.), sectors, industries, and geographical regions. This spreads risk and reduces the impact of any single investment on the overall performance.
• Low expenses: Choose ETFs with low expense ratios, as high fees can significantly erode long-term returns. This is an important reason to choose index ETFs rather than actively managed funds.
• Tax efficiency: Some ETFs are more tax-efficient than others. So choose wisely to help minimize your tax burden. We've written a guide on taxes you should be aware of as a Belgian investor.
• Asset allocation:  Your portfolio should be built based on your goals, risk tolerance, and time horizon. This involves balancing between stocks and bonds, depending on your individual circumstances.

By carefully considering these properties, you can build a well-rounded portfolio that is tailored to your investment needs and objectives. We suggest you to take a look at the portfolios Curvo offers which can serve you as a compass if you decide to build your own portfolio.

Step 9: First steps to invest

Start small

Begin with amounts you’re comfortable losing as you learn.

An advantage of ETF investing is that you don't need a lot of capital to get started. You can even invest with as little as €50 through apps like Curvo. This makes ETF investing possible for everyone, especially young people who just started their career and want to grow their wealth by putting their savings.

Use our resource to learn how to invest in ETFs in Belgium.

Consistency is key

Invest regularly to build habits and take advantage of compounding.

Compound interest is a fundamental concept in investing and is often referred to as the "eighth wonder of the world" due to its powerful effect on the accumulation of wealth. Unlike simple interest, which generates earnings solely on the principal, compound interest accrues on both the principal and the previously accumulated earnings. Over time, this leads to exponential growth of money.

When you're saving, the exponential growth of compound interest will significantly boost the total return on savings or investments. Even if you save a relatively low amount every month, the effects of compounding can lead to substantial growth over the long term.

Educate yourself

Looking back at our education, we realised that we were never taught how to manage our own money. We believe that everyone's financial lives will improve if they are armed with the right knowledge. So before diving into the stock market, it's crucial to educate yourself about investing. Learn about the basic concepts, terminology, and different investment strategies. Consider reading books or following influencers like Thomas Guenter. The Curvo Academy contains numerous resources to educate yourself.

Step 10: Monitoring your investments

Adopt a buy-and-hold strategy

In this strategy, you hold your investments, regardless of market fluctuations, until you reach your goal. For many, this would be at retirement.

The buy-and-hold strategy works because it gives the opportunity to compounding to work its magic. Exponential growth, which is how the stock market grows, becomes really visible in the long term. This means that the majority of your returns will be realized as you approach your investment horizon, due to the fact that your assets have compounded longer.

On top of that, the strategy is much better for your mental well-being. Active investors constantly need to monitor their investments and assess if they need to buy or sell a particular stock. This has the danger of bringing a whole range of negative emotions onto oneself: anxiety, stress, regret... In contrast, the ETF investor who has adopted a buy-and-hold strategy is not concerned with short-term fluctuations in prices and so remains undisturbed.

This control of emotions allows you to act more rational, which results in less impulsive decisions, less transactions, lower fees and in the end a higher return.

Set a schedule for portfolio reviews

Review your portfolio at least once a year. Also, do it after major life changes, like marriage, buying a home, or changing jobs. In these reviews, check that your investments match your goals. Consider if you need to make any adjustments. If you had a high-risk portfolio but your time is short, you might want to shift to a more conservative allocation.

How does rebalancing work?

Rebalancing is the process of restoring your portfolio's target allocation after market movements have caused it to drift. For example, if stocks have done well, they may be too high in your portfolio. You might then sell some stocks and reinvest in bonds to restore your desired balance. Rebalance your portfolio regularly, once or twice each year. It helps manage risk and align with your investment strategy.

Step 11: Avoid emotions

It's important to stay the course

Financial markets fluctuate. Selling under panic during downturns or over-enthusiasm during bull markets, can harm long-term financial outcomes. When investing, gains are made over years rather than days.

Stay calm, buy and hold as much as you can without too much focus on selling. For example, many investors have sold their stocks in panic during the dot com bubble. This often meant a large loss, as many investors bought their investments expensive during the hype, and sold them cheap during the crash.

However, if these investors would have held on to their positions and bought more when they were more affordable, they would have had very strong returns in the years after.

Keeping things simple

A simple investment portfolio is easier to understand, manage, and maintain. The more holdings your portfolio will have, the more follow-up and research will be required.

For example, if you would hold 20 different ETFs or individual stocks, you might feel the need to follow up on all of them, which can make passive investing feel like an administrative task.

That's why it's important to make a good choice on which indexes to follow, which ETFs to buy, and to stick to the investment plan that you have created for yourself.

Step 12: Continuous learning

Investing offers a valuable learning experience. It allows you to understand how businesses operate, analyse financial statements, and make informed investment decisions. This knowledge is not only beneficial for personal finance management but also for future investment endeavours.

When starting out, you might only be able to invest small amounts. However, habits are what will quickly get you to a considerable amount. Investing consistently every single month will be very powerful as your investable income grows over time.

Reflect on your journey

Periodic self-assessment is a crucial part of the learning process. Reflect on your investment decisions, considering what worked, what didn't, and why. This practice will boost your skills and confidence for future challenges.

Concusion

Investing your money wisely is one of the most important steps you can take towards securing your financial future. By following the steps outlined in this guide, from understanding the basics to choosing the right investment platform, you're well on your way to making informed investment decisions. Remember, it's not about timing the market, but about time in the market. So start small, stay consistent, and don't let emotions drive your decisions. And if you're looking for a hassle-free way to invest in a diversified portfolio of ETFs, why not give Curvo a try? It's designed to make investing simple and accessible for everyone.