How do I ensure I'm well prepared for my first investment?

It's important to consider your situation carefully before investing money. These four key points will guide you:

1. Set out your investment goal

The first question to consider is: why do you want to invest? Investment goals vary depending on your circumstances in life.

The most common goals include wealth creation, retirement planning, saving for big-ticket items and building a nest egg. The first two goals are generally long-term investments (at least ten years), whereas specific savings and nest eggs are short- to medium-term ones.

2. Weigh up the risks

As a general rule, the longer the investment period, the greater the risk that can be assumed. This is because it is easier to offset short-term market fluctuations over a longer period.

Growth-led investments, such as shares and funds with a high equity component, are good options for long-term investments for wealth creation and for retirement planning. Pillar 3a pension products are also ideal for retirement planning.

However, secure investments, such as a savings or investment savings account, are the best ways of achieving short-term investment goals, such as saving to buy a car or to set aside a nest egg.

3. Set the amount

You should only invest as much money as you can afford to over the long term. To this end, you need to work out your own income and expenditure. Working out a budget will provide a good overview of your financial situation so you can set a realistic amount to invest.

Investing even very small amounts is worthwhile. The key is starting at the earliest possible stage. For example, investing CHF 50 in a fund each month gives you the opportunity to increase your assets considerably over time. The dividends and interest earned on the invested money are reinvested immediately, thus enabling you to generate a return on the yield itself (compound interest).

4. Broad-based strategy

To minimise risks and achieve steady returns, it is important to distribute your capital across various asset classes, such as equities, bonds, real estate and precious metals – in other words, you need to diversify your investment.

Actively managed funds are ideal for newcomers to investment, as they don't require any in-depth knowledge of the financial markets. The money is invested in various asset classes and individual securities. If a particular security is underperforming, it can be replaced by better performing alternatives in the fund.

Experienced fund managers look after the money in a fund. They decide which asset classes and securities to invest your capital in based on the fund's investment strategy.

Amalia Bianda is a client advisor at Migros Bank and an investment expert.