According to a recent study by BlackRock, the world’s largest asset manager, psychological barriers remain the biggest obstacle to investment. This is based on a survey of 1,002 Belgians. Financial expert Pascal Paepen, in an interview with “Het Laatste Nieuws,” commented, “This is how you can pay for your retirement home.”
Limited Risks
“Many people only hear regarding the stock market when there’s a crash,” says Paepen, highlighting the fear of the unknown. “They don’t know much regarding the rest, because you don’t learn anything regarding it at school. Belgians are taught to save, but not to invest. Many people invest unconsciously through tax-advantaged pension savings, which often include investments in stocks. For others, investment is seen as dangerous and risky. Thankfully, more and more young people today are learning and starting to use trackers, for example. It’s a new experience. Learning to drive a car is scary at first, but over time you become comfortable with it and realize that the risks are manageable with the right information.”
Inflation
Paepen emphasizes the importance of investing due to inflation. He explains, “Money loses value over time due to inflation. A pint used to cost 20 francs, today it costs 120 Belgian francs (€3). Many people associate this rise with the introduction of the euro, but prices increase rapidly over a lifetime. Those who don’t take risks with their money aren’t rewarded. Savings accounts yield almost nothing. Until recently, they yielded 0.11% per year. This has improved somewhat in recent months but is still insufficient to combat inflation.”
Funds and ETFs
Paepen provides solutions. “In the stock market, returns of 8% per year over the long term are common,” he explains. “You don’t even need luck for that. Be aware: one year it might be -20%, the next year +30% – it’s volatile, but over the long term, it works.”
“Another option is to buy a fund from the bank. Ask for a fund that invests in stocks worldwide, for the long term. Compare different banks; their fees can vary considerably. Deposit a specific amount into your account periodically. You can do this monthly or every two months, for example. This way, you buy at both higher and lower prices, and you shouldn’t look back. With this approach, you can expect a gross return of 8% per year. After deducting fees, the net return is around 6%.”
ETFs or trackers offer another investment option. These exchange-traded funds are popular due to their simplicity, diversification and cost-effectiveness. The most popular ETFs track the BEL20 index, representing the 20 largest companies listed on the Belgian stock exchange. From Belgium, you can also invest in a variety of other ETFs, broader or focused on other markets.
“The idea that you can lose money by investing thoughtfully is absurd,” Paepen continues. “Those who adopt a gradual approach don’t need strong nerves.”
No Need to Be Rich
The BlackRock survey reveals that Belgians believe they need at least €13,875 to invest. What’s a realistic starting amount?
€25-50 Per Deposit to Start
“Typically, with a bank fund, you can start with €25 to €50 per deposit. The belief that investing is reserved for the wealthy is false. The stock market is for everyone. All beginnings are difficult, but investing is beneficial even with a small amount. You don’t even need to invest every month. You can do it every two months.”
It’s up to you to decide…
Overcoming Psychological Barriers to Investment: BlackRock Survey Reveals Key Insights
A recent survey conducted by BlackRock, the world’s largest asset manager, interviewed 1,002 Belgians, uncovering a compelling truth: psychological obstacles remain the primary impediment to investment.
Limited Risks
“The unknown is not liked. Many people only hear regarding the stock market when there is a crash,” notes financial expert Pascal Paepen, lamenting the widespread fear surrounding investing.
“They don’t know much regarding the rest, because you don’t learn anything at school. The Belgian has a brick in his belly and learns to save, but not to invest. In fact, many people invest, without realising it: by making tax-advantaged pension savings. Part of this money is also invested in shares. For others, investment is associated with danger and risk. Fortunately, more and more young people today are finding out more and starting to use trackers, for example. This is a first time thing. Learning to drive a car is also scary at first, but over time you get completely used to it and you realise that the risks are limited if you have the right information.”
Inflation: A Silent Threat
The survey highlights the alarming reality of inflation’s impact on savings: “Money loses its value over time due to the devastating force of inflation: a pint used to cost 20 francs, today it costs 120 Belgian francs (Editor’s note: this is equivalent to +/- €3). Most people associate this increase with the introduction of the euro, but prices rise incredibly quickly over the course of a lifetime. Those who do not take risks with their money are hardly rewarded. The savings account yields practically nothing. Until recently, for example, it yielded 0.11% per year. This has improved somewhat in recent months, but is still insufficient to combat inflation.”
Investment Strategies: A Roadmap to Financial Growth
Pascal Paepen outlines pragmatic investment strategies to counteract the erosive effects of inflation: “In the stock market, returns of 8% per year over the long term are quite normal,” he explains. “You don’t even need luck for that. Be careful: one year in the stock market, it’s -20%, the next year +30%. In other words, it’s volatile, but in the long term, it works.”
Funds and ETFs: Diversifying Your Portfolio
“Another option is to buy a fund from the bank. Ask your bank for a fund that invests in stocks worldwide, and for the long term. Also find out regarding the possibilities offered by other banks. After all, the fees charged by a bank can vary considerably. Then deposit an amount into your account periodically. You can do this every month, but also every two months, for example. This way, you buy at both higher and lower prices. And never look back. This way, you should be able to count on a gross return of 8% per year. The net return is then around 6% following deduction of fees.”
Investing in ETFs or trackers provides a user-friendly avenue for diversification: “These funds listed on the stock exchange are a popular method of investment due to their simplicity, diversification and cost. The most popular ETFs are those that follow the BEL20 index, which represents the 20 largest companies listed on the stock exchange in Belgium. But from Belgium, you can also invest in a multitude of other ETFs, broader or focused on other markets.
“The idea that you can already lose money by investing thoughtfully is absurd. Those who adopt a very staggered approach do not need to have a strong stomach,” Pascal Paepen reassures, emphasizing that carefully planned investments mitigate risk.
Investing Beyond Wealth: Accessibility for All
The BlackRock survey revealed a misconception among Belgians: the belief that significant wealth is required to invest. The reality paints a different picture.
€25-50 per deposit: A Realistic Starting Point
“As a rule, with a bank fund, you can start from 25 to 50 euros per deposit. The idea that investing is reserved for the rich is therefore absolutely false. The stock market is there for everyone. All beginnings are difficult, but investing is already interesting from a few dozen euros. It is not even necessary to invest every month. You can also do it every two months.”
The survey findings underscore the crucial need to address psychological barriers and dispel myths surrounding investment. Armed with knowledge and a robust understanding of risk and return, Belgians can navigate the investment landscape to secure their financial future.
