How to start investing in 2025

Investing in the financial markets may seem intimidating, but it can also be one of the most rewarding aspects of managing your finances. While market downturns can be unsettling, investing is one of the few ways to outpace inflation and increase your purchasing power over time. Simply relying on a savings account won’t create wealth. 

If you’re someone who’s thinking about starting to invest in 2025, you’re in the right place. Investing doesn’t have to be a daunting task, and with the right knowledge and strategy, it can become a crucial step toward financial independence. It’s never too late to begin, and 2025 offers a great starting point. Whether you’re hoping to build long-term wealth, save for a major life milestone like buying a home, or simply diversify your financial portfolio, now is the time to take action. The earlier you start investing, the more time you give your money to grow.

The “Why” of Investing

Before investing a single penny, it’s essential to understand why investing is such a powerful tool for improving financial well-being. Money represents freedom, time, and happiness. While we need it for essentials like shelter and food, it also enables us to enjoy experiences and things that bring joy. Every dollar spent reflects time worked to earn it, so wasting money on things that don’t add value is essentially wasting time. That’s why it’s important to focus spending on what matters and save for future value.

Figure 1: Investment Returns vs inflation

However, money in a savings account loses value over time due to inflation. The cost of living rises, meaning the same dollar buys less. Saving alone isn’t enough—investing grows wealth, providing the freedom to stop trading time for money when investments can cover living expenses. Understanding this concept is key, but a solid investment plan is crucial for success.

According to a recent investor survey, 52% of respondents have maintained their investment habits and volumes despite inflation. Meanwhile, 21% increased their investments this year. On the other hand, 24% reduced their portfolios, and 3% are not investing at all. The results indicate that some investors are investing more to offset inflation’s impact, while others have fewer opportunities to invest due to rising costs and reduced disposable income.

Figure 2: Investment Habit affect survey

According to a recent survey by PeerBerry, many investors view P2P loans (29%), ETFs (20%), stocks (14%), and real estate (13%) as offering the most attractive balance between risk and return. Notably, 21% of respondents reported avoiding any losses over the past year. While some investors encountered setbacks with P2P loans, nearly half (48%) of those surveyed highlighted P2P loans as their most profitable investments.

Figure 3: Investment Type Loss Analysis Survey

Figure 4: Investment Type Yielding Highest Profit Analysis survey

Decide How Much to Invest

When deciding how much to invest, it’s essential to start with the basics: understanding your financial goals, risk tolerance, and investment time horizon. Clear goals help guide your investment choices, ensuring they align with personal objectives such as retirement, home renovations, or funding education. Understanding your risk tolerance is key to selecting the right asset mix, balancing potential returns with acceptable levels of risk.

Diversification is a core strategy for managing investment risk. By spreading investments across different asset classes, sectors, and regions, you reduce the impact of poor performance in any single area on your overall portfolio. Various investment accounts offer distinct advantages and should be chosen based on your financial goals and tax situation.

Understand Your Investment Options

Bonds 

Bonds are commonly used by investors to generate a steady income stream. While they offer lower returns compared to stocks, they come with less risk. Bonds typically experience less volatility than stocks, making them an excellent option for stabilising a portfolio that includes higher-risk, high-return investments.

Stocks

A stock represents a share of ownership in a company, also referred to as equity. Stocks are bought at a share price, which can vary significantly, ranging from just a few dollars to several thousand, depending on the company.

Mutual Funds

A mutual fund is a pooled investment that combines various stocks, bonds, or other assets, allowing investors to diversify without selecting individual securities. This diversification generally makes mutual funds less risky than individual stocks. Some mutual funds are actively managed by professionals, while index funds— a type of mutual fund— track specific market indices like the S&P 500. Index funds typically have lower fees due to the absence of active management.

Alternative Investment

Alternative investments are assets beyond traditional categories like stocks, bonds, and cash. These include real estate, commodities, hedge funds, private equity, and the growing area of peer-to-peer (P2P) investments. While hedge funds and private equity can yield substantial returns, they often require significant initial capital and are typically targeted at ultra-wealthy investors, limiting accessibility for the average individual. Similarly, commodities, though lucrative during certain market conditions, are highly volatile due to unpredictable geopolitical risks and fluctuating supply and demand dynamics.

In contrast, P2P investments stand out as a more accessible and balanced alternative. Also known as P2P loans, they allow individuals to lend directly to borrowers or invest in small businesses, bypassing traditional financial institutions. With potential net returns of 8% to 12%, P2P investments often outperform traditional savings accounts or bonds. Their lower entry requirements make them suitable for smaller investors, offering an approachable way to diversify a portfolio. When carefully managed, P2P investments can provide a unique blend of accessibility, risk management, and rewarding returns, making them a compelling choice among alternative investment options.

The Bottom Line

Starting your investment journey is a rewarding step toward financial independence, but staying on track is key. Avoid common mistakes, stick to a long-term strategy, and keep learning. Whether you’re educating yourself through articles or working with a trusted advisor, the most important thing is to take that first step. Your future self will thank you.

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*This article is not meant to recommend CapBay products or be used as a tool to make any investment or financial decisions. Product recommendations must be independently evaluated before you invest. Any product recommendation by CapBay must not be regarded as financial planning or financial advice.