How to invest 25.000€?

Key Takeaways

Before you start investing, you should acquire some knowledge about investing.
The time horizon and the tolerable investment risk are key factors in determining your investment opportunities.
Depending on how liquid you want your investments to be, there are different ways to invest the 25.000€ for each asset class.

Introduction: How to invest 25.000€?

The inflation rate in Germany has been rising steadily for some time. In October, the inflation rate is expected to exceed the double-digit mark of 10%. In addition, the stock market is in a bear market and is more than 20% away from its highs. Achieving a positive real return in such times can seem very difficult.

So what should you do if you have a large amount of money lying around that you are reluctant to leave in your account? In this article, we will assume that you have 25.000€ at your free disposal and want to invest it. How exactly you proceed and what to consider, will you learn below.

Before you start investing

When it comes to investing, you very often get superficial knowledge on the Internet, or maybe you can get to financial gurus who “apparently” make you rich quickly. To avoid a high loss, it is beneficial if you acquire knowledge yourself. For this purpose, you can, for example, read investment books, you can watch our videos, or read our articles. This knowledge will help you later to make the right investment decisions.

After you have acquired good fundamental knowledge, you still need to answer a few essential questions. These will simplify your choice of potential investments so that you can invest your 25.000€ well. These questions are:

How long do you plan to invest? The time horizon you have available for investing is instrumental in determining which investments to choose. With a rather short-term time horizon, safer investments are recommended. In the long term, supposedly riskier and more tax-efficient investments (e.g. “Vorabpauschale”) can also be reasonable.
How much risk are you willing to take? There are extremely safe investments that carry almost no risk, such as the normal bank account or the fixed-term savings account. However, these variants also have lower returns than for example ETFs. However, if you want to invest in stocks or even with cryptocurrencies, the risk increases significantly. Here you can also lose 50% or more. Therefore, it is important to determine for yourself how much loss or risk you can bear.

Of course, these are not the only questions. But based on these questions you can narrow down the ones that follow. Essentially, this is to show the financial products in which you can invest. Each financial product requires a different investment horizon and a different investment risk. So try to be honest with yourself and answer this investment question in the best possible way.

Do you need help on how to best invest your money and build up a strategy? Then let’s find out together.

The right way to invest 25.000€

When you have considered the questions above when you want to invest €25,000, there are various investment options. Depending on the risk characteristics and time period, different asset classes can be considered. You can choose from the following asset classes:

Bank or fixed-term savings account

If you either have a very short investment horizon, or you want to invest without risk, then you have the choice between a bank account and a fixed-term savings account. The difference is that with a bank account, you can access the money at any time. However, you won’t earn much interest on this. With a fixed-term savings account, you get a higher interest rate, but you can only access the money after the term is over (A flexible savings account is more accessible).

Real Estate as an investment

Another investment option is real estate. Here, the focus is on your time horizon. Namely, on the one hand, you can buy property independently and use the 25.000€ to pay a down payment and the additional purchasing costs. The disadvantage here is the illiquidity and the location risk you have thereby. However, you also get a higher chance through outside capital (leveraging with a mortgage).

Real estate security tokens

Real estate security tokens, on the other hand, are tied up for a much shorter period of time. With these, you can also spread your risk by investing in different properties. So you carry less risk than with a conventional real estate investment due to the lack of debt capital and diversification. However, this also means you lack leverage, which leads to a lower return overall. If you are interested in investing in real estate security tokens, you can read more about it on GermanReal.Estate.

ETFs & Mutual Funds

Also available to you as an investment is an investment in ETFs or Mutual Funds. Here you can choose a normal investment account or a pension. While you are more liquid with an investment account, you receive certain tax advantages with a pension. The advantage of both investments is that you can use the 25.000€ as a starting capital, which you can then increase with the help of a monthly savings plan. Important here is a long investment horizon. While an investment account can make sense from as early as five years, a pension only makes sense for +10 years or more. In addition, the focus here is on the goal of the investment, as this depends on the time.

Conclusion: How to invest 25.000€

Unfortunately, as is often the case, there is no one asset class that is the best. Rather, it can either be a mix of the different options. That’s because the investment should be specific to your individual situation. Therefore, try to build a foundation of knowledge first before you start investing (How do Germans invest 100.000€?).

You can determine your strategy on your own. However, if you need help with this, it may be wise to discuss this with a financial advisor. They can also explain the different options to you in more detail. If you would like to take advantage of this help, feel free to arrange a free consultation with us here.

How to invest 25.000€