Wealth building – in 5 steps

Inflation devalues ​​your hard-earned money. So, how can you still manage to make it work for you and build up a small or even large fortune? Here you will find helpful answers about stocks, bonds, real estate, and ETFs. Making money work for you sounds tempting. But have you saved something, inherited it, or received…

Inflation devalues ​​your hard-earned money. So, how can you still manage to make it work for you and build up a small or even large fortune? Here you will find helpful answers about stocks, bonds, real estate, and ETFs.

Making money work for you sounds tempting. But have you saved something, inherited it, or received a one-off payment? Is there any money left over from your salary after deducting all expenses? Then you can increase your capital with the right investment and thus secure yourself in old age or provide for your children.

The current problem is that high inflation devalues ​​your money. What you have today worth less tomorrow. The right system is, therefore, all the more important. We will show you the advantages and risks of different investment strategies and first look at something basic.

5 steps to build your wealth

Step 1: Set your goal.

Before investing your money, you should set a goal. What do you need, when, and how much? For example, do you want to top up your future pension? Do you want to build up capital for a house or an apartment? Or do you need a larger sum in two or three years for a new car, a trip around the world, or renovation work on the house?

The duration of the deposit determines your profit target. The more time you have and the longer you deposit, the greater the power of compound interest. 

10 years, 20 years, 40 years: If you know when you want to take which steps in your life and with your retirement provision, this has a decisive effect on your wealth accumulation. Because: The longer your investment period, the easier it is for you to live with temporary price fluctuations. Therefore, a high proportion of equities is particularly interesting as a return driver in the long term.

Step 2: Determine your budget.

The second step is to consider how much you can invest. What is your income? What are your expenses? How much can you save? For example, you can get a very well-founded overview of your financial situation with the Sparkasse financial planner.

Very important: Calculate an emergency reserve. If the washing machine unexpectedly needs to be replaced, the car breaks down, or you have family problems, you shouldn’t have to take out a loan first. Usually, the interest you pay on loan is higher than the return you get on your savings. The emergency reserve should amount to 3 to 6 net monthly salaries and be available as quickly as possible. For example, if you deposit it in an overnight deposit account, you can access it at any time, even if you only get low interest on it. There are also other liquid forms of investment.

You should also include your time budget in your considerations: How much time do you have to deal with your investments? How closely do you want to follow business and stock market news? Please note: more time invested does not necessarily mean a high return. To outperform the market, you need a lucky hand or an informational edge. Why exactly should you be better than the many professional investors who largely determine the market prices through the large sums that they manage?

You should generally achieve a favorable time-yield ratio if you invest your savings in ETFs or funds. This is because the corresponding amount will be automatically debited from you and, depending on the product, your portfolio will reflect the performance of the market fairly accurately.

This does not rule out that you should regularly check whether the investment decisions you have made are still in line with your goals and circumstances. Regular discussions with the advisors at your savings bank can provide you with valuable insights for your investment.

Step 3: Determine your risk tolerance.

Yes, you can safely invest your money. If you invest amounts of up to EUR 100,000 in a time deposit account, it is protected by the deposit guarantee system even in the event of bank insolvency. Furthermore, only inflation can reduce the value of your investment if it is higher than the interest rate.

But you can also enter into extremely risky deals. With some certificate categories that multiply (“leverage”) the price development of an index or security many times over, you can theoretically make hundreds of percent profits in one day. However, this is not an investment but speculation. A relatively small movement in the wrong direction can mean a total loss. With certain very risky products, you may even be obliged to pay additional money. That increases your loss even more. The following also applies: risk and return are not 1:1 . Just because something is very risky doesn’t mean that it should also have a high average return.

Determine for yourself how much risk is appropriate. What type of risk are you? Can you stand bad price developments? Up to what point? Assess the opportunities and risks realistically, preferably in a conversation with a neutral person like our consultants. Because emotions can quickly displace facts and lead to incorrect risk assessments.

A good indicator: If your investments keep you awake, your investment is probably too risky.

Step 4: Find the right investments.

Money is a commodity that is in demand. So there are endless ways to invest your savings. A look at the most important categories:


Bonds are issued by governments and corporations. When you buy a bond, you give the issuer a loan, so to speak. A bond pays interest called a coupon. Depending on the type of bond, you will also receive the nominal value of the bond back after a fixed period of time, i.e., the amount you lent. You can also resell most bonds to third parties in between on the market.

Opportunities: Manageable as coupon and redemption amounts cannot increase unexpectedly.

Risks: Total loss possible in the event of default.


With stocks, you buy a stake in a company. If the company becomes more valuable, the value of your investment will also increase. In addition, some companies pay out dividends, a fixed amount per share.

Opportunities: In theory, the amount invested can be multiplied over the long term.

Risks: Stronger price fluctuations are common, and total loss is also possible in the event of insolvency and a low insolvency estate.

This is how much return the Dax, TecDax, MDax, Dow Jones, Nasdaq, Nikkei, and the MSCI world index have achieved in the last 20 years:

indexCourse October 2002Course October 2022yieldreturn per year
Dax2,89212.172+ 321%7.5%
MDAX3,28421,894+ 567%10.0%
Dow Jones Total Return Index12,32570.119+ 469%9.1%
Nasdaq Composite Total Return2,007*12,519+ 524%10.1%
Nikkei 225 Total Return10,51545,266+ 330%7.6%
MSCI World Gross Index2,20012,645+ 475%9.1%

Source: DaxTecDaxMDaxDJITRNasdaqMSCINikkei

*October 2003

Note: The Dax is a  performance index in which dividends are included as if they were fully reinvested. The Dow Jones, which is commonly mentioned in the news, is a price index. Only the companies’ market values are evaluated – without the dividend payments. The table, therefore, takes into account the Dow Jones Total Return Index, which, like the Dax, is a performance index and reflects the complete return (share price increase + dividend). This applies to all indices mentioned.

Calculation example:  If you had invested EUR 1,000 in the Dax on the stock exchange 20 years ago, your portfolio would have grown to EUR 4,208 in October 2022, and even to  EUR 6,667 in the MDax. If the development continues for another 20 years with the same return, your 1,000 dollars would be worth 18,044 dollars in the Dax and 45,259 dollars in the  MDax. The difference between an annual return of 7.5 percent and 10.0 percent is enormous in the long run thanks to the compound interest effect. Please note, however, that the price development of the past few years says nothing about the future.

Etfs, funds, etc.

You can also participate in the performance of several companies together – via ETFs (Exchange Traded Funds) and funds. While actively managed funds handpick the mix of stocks, bonds, and the like and adjust it again and again, most ETFs automatically map the development of an index such as the Dax, Dow Jones, or MSCI.

Opportunities: the invested capital can be multiplied, especially in the long term increases in value are realistic.

Risks: Stronger price fluctuations are also possible, but total losses are virtually impossible.


If you are not buying a house or apartment yourself, you can build a portfolio of commercial and residential real estate through real estate funds.

Opportunities: Moderate increases in value over the long term.

Risks: Dependence on economic, demographic, and political developments.

Money market: fixed-term deposit account, overnight money, savings book, and Co.

Savings banks and banks offer various options for savings deposits. They are given fixed or variable interest rates. These include savings accounts, money market accounts, time deposit accounts, and also checking accounts. The amount of interest paid depends on how long you invest the money, how flexible you want to access it and how high the key interest rate is at the moment.

Where does the interest come from? The banks invest your money, store it at the central bank or use it to grant loans. You will receive interest as a reward.

Opportunities: Depending on the interest rate, a small, secure increase in value is mostly covered by a security system.

Risks: Interest rates may be lower than the rate of inflation.

Read also: Deflation – definition, causes, and effects

Step 5: Choose the right investment mix.

Choose the right products from these options and combine them for your strategy. A well-structured investment is characterized above all by a broad mix of different asset classes such as real estate funds, bond funds that invest in bonds, or equity funds. Depending on how risk-oriented you are and how you set your financial goals, you can mix the asset classes  – and invest individually.

Consider your own preferences. There are many sustainable investments. Anyone who trusts algorithms can use Robo-advisors. The digital asset management of savings banks automatically manages your investment with the support of financial experts.

Always consider fees when making any investment decision. You can significantly reduce your investment, and your wealth accumulation will be less.

5 tips for investing

Tip #1: diversify.

If you put everything on one card, your risk increases significantly. For example, you should never put all of your money into one stock. No matter how well-informed you are as an investor about the company, unforeseen things can always happen that make its value on the stock market fall or become worthless altogether. This includes cyber attacks or other criminal activities, as well as technical errors, human error, political decisions, or accidents. It is also not advisable to invest too heavily in your own business. You lose your job and a good chunk of your wealth if it goes bankrupt.

You should, therefore, also think carefully about whether it makes sense to buy a property as your only retirement plan. Construction defects, accidents, political changes, and weather damage can significantly reduce the value of your property and, thus, your entire assets.

A solid wealth-building strategy is to construct a multi-asset class portfolio.

Tip #2: Don’t buy stocks on credit.

It may seem tempting to invest more than one’s own capital when the market is performing well. But if you take out a loan to buy stocks, you could quickly become over-indebted.

Here is an example calculation: You invest EUR 5,000 of your savings in the stock market. In addition, you take out a loan of 5,000 dollars in order to benefit even more from the rising prices. Suddenly, the price collapses by 50 percent, which is not uncommon for individual stocks. Your investment of 10,000 dollars suddenly shrinks to just 5,000 dollars. You’ve lost all your own money and need to pay back the loan with interest.

Tip #3: Pay off the loans first before saving.

Before you start saving, you should pay off your debt. Because their interest rates are usually higher than those of any investment opportunities. Money that gives you a return of perhaps 5 percent on the stock market is not a sensible investment if you still have to pay off a loan with 7 percent interest. But check carefully. Especially in times of rising interest rates, older loans may be cheaper than the interest on savings. In addition, there is no possibility of special repayment or early redemption for every loan.

Tip #4: Try to increase your income.

Making money work for you is good, but it often involves risks. Invest your time in work that is guaranteed to make you money. Maybe you can negotiate a raise or change jobs? The higher your income, the easier it is for you to save.

Check whether you are eligible for capital-forming benefits, a company pension, or state benefits such as the Rürup pension.

Tip #5: Save your time.

What good is your fortune if you spend a lot of time building it up? The following applies: more time invested does not automatically create more wealth, at least at a certain point. Only a few beat the market in the long run.

Frequently asked questions about building wealth.

How can I build wealth?

You can build up wealth with money that is left over from your income after all expenses or that you have inherited, for example. You don’t need a large sum of money for this. The right investment decision and the investment period are important. In the past, investors have done particularly well on the stock market over the long term.

The compound interest effect turns 1,000 dollars into 6,667 dollars with an annual return of 10 percent, as the MDax has shown over the last 20 years. However, when making your investment decision, remember that developments from the past few years say nothing about those in the coming years. If interest rates rise, for example, fixed-income investments become significantly more attractive than they were when interest rates were negative.

How can I build wealth with little money?

Indeed, risk and return are not 1:1 related. However, if you want to make a small fortune out of little money, you should look for investments that promise high-interest rates or returns. In the past, it was mostly stocked. Many ETF savings plans that replicate the development of stock indices start from as little as 25 dollars a month. However, you should note that you should be particularly careful with money when it is tight anyway. Therefore, consider whether the safety of your system should not have priority.

How much wealth do I need at what age?

How much money you need and when depends on your circumstances. In general, the earlier and more continuously you invest, the greater your wealth accumulation. Get an overview of your finances and your needs.

What investment strategies are there?

The investment strategies differ primarily according to one’s own willingness to take risks and the investment horizon. Risk-averse people should rely on fixed-rate savings bonds. If you want to take more risk and stay invested for a long time, you could increase the proportion of shares. It is advisable to focus on a mix of different asset classes so as not to be too dependent on a single market.

Why is wealth accumulation important?

If you save today, your money can soon multiply. This will ideally give you more in the future and strengthen your financial independence. Moreover, with wealth accumulation, you can set up a private pension scheme. On the other hand, money that is not invested loses value due to inflation.

When is short-term or long-term wealth accumulation?

If you need a lot of money in the near future to fulfill a wish, you should aim for a high return and be prepared to take some risks. The investment mix might be different if you’re young and need the fortune to save for your retirement. The best thing to do is talk to the advisors at your savings bank.

How should I distribute my wealth?

Check your risk type and diversify your assets across different asset classes such as stocks and bonds.

What is good fortune?

What you perceive as good wealth is entirely up to you and your needs. It doesn’t take much to be happy. But being financially secure takes away some of the worries.

Read also:

Wealth building – in 5 steps

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