A Guide to Investing in Spain for Beginners
Maybe you have a bit of spare cash, or maybe you’re looking for a way to earn a better return than your savings. Either way, investing may be a good way to make your money grow, but it makes sense to know what your options are if you’re a beginner.
Before thinking about looking for a product or company to invest in, consider both your time horizon and your attitude to risk.
If you’re looking at investing over the long-term, you may decide to opt for products that can ride out the ups and downs of the markets. However, if you want to invest in the short-term then a more conservative approach may be more advisable to protect your money as far as possible.
Additionally, some people are naturally more risk-averse than others, so not all financial products will appeal to everyone in the same way.
When you have an idea about where you stand, it’s time to consider some of the most popular investments.
Popular investments in Spain
All Spanish financial institutions must classify their financial products on a scale from the safest to the riskiest. You can find full information in our article How to check if your savings and investments are safe.
In Spain the most popular investments are:
Shares. You can buy shares in a specific company directly or in several companies via an investment fund.
Government and Regional/City Securities. These provide a fixed interest over a certain number of months or years. Normally longer timeframes will provide a higher return, for example 10 years or longer.
Investment funds. Funds can cover a myriad of products such as shares, emerging markets, “green” industries and more.
Pension plans. Take a look at our dedicated article: Spanish private pension plans and annuities.
Property. As well as buying a house or flat, there are also new initiatives to buy a share in a property thereby opening up the property investment market to people with less capital.
P2P platforms. These online platforms allow you to lend money to people who require a loan, and, in return, you receive interest on your “investment”.
Alternative investments. Wine, gold, raw materials, art and more. These are highly speculative markets and not usually recommended for beginners.
How to invest: banks, brokers and apps
Previously small investors would have used their bank in order to buy shares or other types of investments. Luckily times have changed and now investors can choose from lots of different and cheaper options.
With online investment platforms or apps, available in different countries, you can start investing in no time at all. Some of these apps allow for small regular investments whilst others require a larger lump sum. Compare different apps to find the one that fits in with what you’re looking for.
If you’d rather take a “hands-off” approach, the new range of robo-advisors could be the way to go. Studies have shown that robo-advisors often beat over half of funds that are actively managed by brokers. You can find robo-advisors that replicate the main international stock markets, including the IBEX 35 in Spain.
What to look out for when investing
Whichever option you decide to use, you need to look out for a few things:
- The costs. Fees, commission and more costs can seriously affect your returns. Some apps may charge a small regular management fee, but brokers or funds may charge fees for buying and selling investments, management, custody and, in some cases, the more successful the investment is could mean you’re charged even higher fees.
- How safe is your money? The majority of investments are not protected and you could lose some or all of your money. Even if your investment goes well, it could be that you need to sell when there’s a dip in the market thereby reducing your overall returns.
- Beware of scams. Anything that looks too good to be true will usually be a scam. Be particularly carefully with social media ads and unsolicited emails. Investigate any company or app carefully and read the legal text and Terms & Conditions in detail before transferring in any money.
Before investing you should do your homework first and not rely on recommendations. Remember that past performance is not indicative of future results.
What about crypto?
Cryptocurrencies are hot news right now, but they’re definitely not for everyone.
With crypto you can make huge gains, with some increasing by over 5000% in one year. But huge increases can also mean huge decreases: depending on when you buy, and which cryptocurrency you choose, you could win big or lose a lot of money. Crypto markets are extremely volatile, so only invest an amount you feel comfortable with in case the market drops heavily after your purchase.
You may feel safer with well-known cryptocurrencies such as Bitcoin, Ethereum or Litecoin, but there are many more. Some appear and disappear in a short space of time; at the time of writing there are around 1300 types of cryptocurrencies available.
Disclaimer: The above information does not constitute financial advice. Before deciding to invest you should carry out your own due diligence and speak with a financial advisor if necessary. Please read our Terms & Conditions of Use for more information.